Mixed views over regional currency

union would be a good move for Zimbabwe.
“A regional currency would be a positive development for Zimbabwe,” he said.

The PTA Bank president was speaking in the context of the challenges that the country was facing in accessing international and regional lines of credit due to its present low credit rating.
However, Common Market for Eastern and Southern Africa (Comesa) Business Council secretary-general Mr Trust Chikohora told Herald Business that there were other key issues that require addressing before a monetary union is possible.

“At the moment countries are still dealing with issues of common external tariff and duty-free entry of goods that meet the requirements of the rules of origin.
“This is a process which will take some time before we are ready for the common market which would then include aspects such as free movement of people and a common currency.

“Economies are also at different stages of development with others such as Zimbabwe still recovering from a decade-long period of economic decline, therefore I do not think that a common currency is very near,” he said.
Mr Chikohora also said challenges that other regional blocs such as the European Union had faced with the euro could make Comesa members sceptical about establishing a common currency.

“Problems in the eurozone could also make the region become more cautious before adopting a common currency.”
Zimbabwe has been facing a liquidity challenge since adopting a multi-currency regime in February 2009, a strategy that also resulted in the Government effectively losing control over the country’s monetary policy.

The de facto foreign exchange regime is classified by the RBZ as “exchange arrangement with no separate legal tender”.
Consequently, the Government has not been able to make fiscal and monetary policy decisions aimed at improving the country’s macro-economic environment.
Some observers believe that at present, the establishment of a regional currency — either by Sadc or Comesa — offers the country’s best way out of the current

liquidity squeeze.

Earlier this year, Finance Minister Tendai Biti hinted that the country was more likely to join the Comesa Monetary Union as opposed to the Rand Monetary Union.
“Joining the Rand Monetary Union will render Zimbabwe powerless over its monetary and fiscal policies as they will have to draft this in consultation with the South

African authorities. It gives the South African central bank too much power over Zimbabwe’s monetary and fiscal policies.
“Thus we are not planning to join the Rand Monetary Union, but we are monitoring how the situation will pan out in respect of the Comesa Monetary Union,” he said at the time.

There has, however, been very limited progress in the establishment of the Comesa Monetary Union.
The last significant development was the setting up of the Comesa Monetary Institute (CMI) in Kenya last year, which is aimed at fast-tracking the realisation of the regional economic bloc’s Monetary Co-operation Programme.

The monetary co-operation programmes’ ultimate objective is the creation of the Comesa Monetary Union by 2018.
But the implementation of a regional monetary union also requires the broader implementation of member states’ commitments to the regional trade blocs.
For instance, Comesa started with a Free Trade Area, and is now at the stage of a Customs Union, with the intention of finally coming up with a common market which will then include a common currency.

In respect of the Comesa region, Mr Chikohora noted that Zimbabwe has signed and ratified most of the protocols and is currently working on the common external tariff as required by the bloc’s Customs Union.
“In general, I believe that we are among the leaders in the implementation of commitments towards regional integration.

“Zimbabwe has been used as an example, particularly in implementing the one- stop border post at Chirundu, which other countries are learning from.
“We have also led in implementing the simplified customs clearing for informal traders,” said Mr Chikohora.

In terms of the Sadc region, the International Monetary Fund in its latest Article IV consultations report on Zimbabwe said the country was implementing its regional trade commitments in slow motion.

This is because in the case of Sadc, the regional grouping granted Zimbabwe a temporary suspension of its tariff reduction commitments to provide local industry time to recapitalise and restore competitiveness.