Harare, (New Ziana) – Zimbabwe is still far from adopting a mono currency as it is yet to achieve the conditions that will enable it to do so, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube has said.
He said this while responding to questions during a post Cabinet media briefing this week. Zimbabwe currently uses a multi-currency system which includes the Euro, the Pound Sterling, Rand, Pula and the local Zimbabwe Gold (ZIG), a gold backed currency.
“First of all, we need to be sure that we have adequate foreign reserves to defend the domestic currency, the ZIG, if ever it comes under any speculative attacks. There are certain rules and benchmarks around the world, such as six months import cover for example. So that you are then able to cover six months of your imports without any further influence,” said Prof Ncube.
He said the country needs to also improve on external debt clearance because such debts pose a risk to the value of the currency.
External debt clearance will allow the country to access balance of payments reports to help the country secure credit lines from international financial institutions.
This would in turn help support the country’s reserve position to be able to deal with demand by importers and defend the local currency.
“I must say that on the other side we are doing the right things such as maintaining tight monetary policy but also being able to maintain prudent and tight fiscal policy,” Prof Ncube said.
“The direction of the current account as well is in the right direction in the sense that we do not have any current account deficits but to the contrary, we have current account surpluses.So all those are ingredients towards creating the right environment for a mono currency to eventually be introduced but we are not there yet.”
Turning to the reduction of the exporters foreign currency retention threshold from 75 percent to 70 percent, Prof Ncube said the extra 5 percent is being swapped for ZIG to bolster the reserve accumulation program and strengthen the local currency, and in turn improve import cover.
“So reserve accumulation is our target and so far we have about US$550 million which will go a long way in signaling the stability of our currency and we want to do more,” he said.
He said when necessary, the foreign currency would be sold into the market and could be used to cover any external obligations that require foreign currency.
New Ziana
