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Yoliswa Dube
THE Reserve Bank of Zimbabwe recently approved domestic trading in the Chinese yuan (CYN), Indian rupee (INR), Japanese yen (JPY) and Australian dollar (AUD) in a move that will effectively make those currencies legal tender. Acting central bank governor Charity Dhliwayo said exporters and members of the public could use and open accounts denominated in the currencies.
She said because trade and investment ties between Zimbabwe, China, India, Japan and Australia have grown appreciably, the Minister of Finance and Economic Development, Patrick Chinamasa decided to include their currencies in the basket of already circulating currencies.
“In this regard, we wish to advise exporters and the general transacting public that in addition to opening of accounts denominated in Botswana pula, British pound sterling, euro, South African rand, United States dollar, individuals and corporates can also open accounts denominated in the AUD, CYN, INR and JPY,” said Dhliwayo.
However, it seems members of the public do not understand how the introduction of these new currencies would work and how it would benefit them.
“The introduction of these new currencies will not work and it will not solve the liquidity crisis in the country. It will just cause more confusion especially when it comes to exchange rates. What we need is to be printing our own money,” said Bulawayo resident, Grace Mawire.
Affirmative Action Group vice president Sam Ncube said: “We are all confused. It is very difficult to understand how it is going to work. We are sceptical about the whole issue. Are they going to mop out the US$ and leave us with currencies that are not international?”
Ncube was however quick to add that there was probably nothing to worry about.
“We had never heard about some of these currencies so we really do not know if they are going to take advantage and flood us with other currencies. Will we be able to use the INR in Botswana or South Africa?
“It might be difficult to transact in these currencies in the Southern Region. I think it will definitely bring a lot of confusion. As it is, we are already struggling to calculate the South African rand or Botswana pula against the US$ and now they want to introduce currencies that we are not familiar with. It is going to cause a lot of confusion at the market place,” he said.
Economic experts were on the other hand convinced the move would not cause any puzzlement but would be useful for trade relations.
Zimbabwe National Chamber of Commerce chief economist Kipson Gundani said there would not be any uncertainty as Zimbabwe was already using the multi-currency system.
“The introduction of these new currencies will be useful because the trade patterns with India and China for example have increased over the years and this will remove exchange rate risk because we will now be trading in the same currency.
“Although there is a general belief that the move would improve liquidity, that is not the case. This is so because our liquidity challenges are emanating from huge imports so the solution is to increase productivity. The introduction of more currencies helps but it will not solve the challenges we are facing,” he said.
Gundani said it was important to look at the economy and the lead causes of the challenges it is facing.
“We need to be attracting investment into the country. We need to export more as well as circulate income in the country. We also need to look at the symptoms of the economy such as poor investment and low income, which legislators can do little about,” he said.
Economic analyst Luxon Zembe said the introduction of new currencies should not be frightening to Zimbabweans because they have been using a multi-currency system for years now.
“The multi-currency system has been around for a while now but what is key is to pick currencies that are global and stable and those that we trade with. We trade with China, Japan, India and Australia so it makes sense to have access to their currencies, just like we have the South African rand and the Botswana pula as well as the US$, which is a global currency,” he said.
Zembe said the introduction of the INR, JPY, CYN and AUD should boost trade between Zimbabwe and the respective countries.
“Currencies are chosen based on how stable they are because if you choose an unstable currency you suffer exchange rate loss as a result of fluctuating rates. In line with the multi-currency system as well as trade, Zimbabwe saw it fit to choose Chinese, Japanese, Australian and Indian currencies,” he said.
Zembe added that there was a lot of traffic in terms of business, even medically where Zimbabweans now travel to India for medical attention. He said it was unfortunate that the US$ has had a psychological impact such that it would be difficult to convince Zimbabweans that these other currencies were equally good.
“We are a US$ market and it has had a psychological impact on Zimbabweans. There is need to have trade promotions so that people are able to accept these new currencies. Their introduction is just a matter of increasing the options in terms of trade,” he said.
The move is also set to strengthen global relationships.
“If you look at the far east trade, China and India have populations of about 2,5 billion and this means that they are mega markets. Business markets are huge and Zimbabwe needs economic turnaround and growth.
“It is good that these countries have accepted to do business with Zimbabwe, although it might take time for people to accept these currencies,” he said.
Zembe however said some of the new currencies’ usage was limited.
“Some of these currencies are limited in terms of international usage such as the INR and this may pose as a disadvantage,” he said.
Zimbabwe was forced to abandon its own currency and introduced multi-currency in 2009 due to hyper-inflation.
Online Reporter