Commercial Farmers' Union of Zimbabwe

Commercial Farmers' Union of Zimbabwe

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GDP must reach US$15bn before Zimdollar returns

GDP must reach US$15bn before Zimdollar returns

Friday, 11 March 2011 09:48

Bernard Mpofu

FINANCE minister Tendai Biti says Zimbabwe has to grow its economy to US$15 
billion and bolster its current account position before bringing back the 
now redundant local currency.

This task for government, which is targeting a Gross Domestic Product of 
US$9 billion by 2015, could signal the extended use of the multiple currency 
system adopted in 2009. The finance ministry is projecting a 9,3% GDP growth 
this year.

Biti this week told business leaders in the capital that government was 
working on a paper that would review the multi currency system adopted two 
years ago to stop unprecedented hyperinflation.

He said the paper, which treasury expects to complete by year end, would 
outline whether government would maintain the prevailing payment system or 
consider joining the Rand Monetary Union.

“At the moment our current account is a disaster. We are importing three 
times more than we are exporting. A negative current account cannot sustain 
our local currency,” Biti said.

“Secondly, the issue is foreign currency reserves. We won’t be able to 
return to the Zimbabwe dollar unless we have a GDP of US$15 billion.In the 
medium to short term, the benefit of abandoning the Zimbabwe dollar far 
outweighs costs associated with not having a monetary policy.”

Official figures show that total exports last year grew by 25% to US$2,5 
billion on the back of increased mineral and agriculture sales while imports 
were estimated at US$4 billion.

The adoption of multiple currencies, which has resulted mainly in the use of 
the greenback, the South African Rand and the Botswana Pula, has left the 
central bank with limited control on money supply and inflation.

With no exchange rate for the Zimbabwe dollar, the cost of labour, which 
Biti said was relatively higher compared to regional peers, had become the 
“new exchange rate” for the country, adding that labour costs had 
contributed to the collapse of the local textile industry.

“Because we no longer have an exchange rate for the Zimbabwe dollar, the 
cost of labour has now become the exchange rate. Any investor wishing to 
invest in the country now has to look at the cost of labour. It costs ten 
times more to produce a pair of shoes in Zimbabwe than it costs in China,” 
he said.

On lower denominations, Biti said government would soon make a “major 
fundamental announcement” amid reports that the United States government has 
agreed to supply coins currently in short supply.


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