Zimbabwe should join the South Africa Rand Multilateral Trade Area if it is to retain its competitiveness and gain access to international capital markets, according to economists.The union is made up of Namibia, Lesotho Swaziland and South Africa. Economics lecturer at the University of Zimbabwe and advisor to the Ministry of Finance Mr Ashok Chakravarti said the dollarisation of the economy was a policy dead-end and had made the country a high cost economy.
According to the International Monetary Fund (IMF) estimates, the US dollar today is 15 percent too strong for Zimbabwe, making the economy highly uncompetitive.
“Dollarisation has made Zimbabwe a high cost economy and it’s a policy dead-end as our fiscal and monetary policies are constrained. The solution is joining the Monetary Union with SA it’s not ideal but we have no solution,” said Mr Chakravarti.
He said the depreciation of the rand had opened the local market to an avalanche of imported South African goods.
“Over the last year the South African rand depreciated by over 50 percent. Considering we import almost 70 percent of our goods from SA then we should enter the Monetary Union,” said Chakravarti.
However, Reserve Bank of Zimbabwe deputy governor Dr Kupikile Mlambo said while they would be benefits reaped from joining the Rand Union the volatility of the rand made the option unattractive to Zimbabwe.
“The rand is the most volatile currency in the world and coming from our history we would prefer to keep the multi-currency policy and not link to the rand. Our market has also moved from rand assets to US dollar assets as reflected in Bulawayo where goods are now priced in US dollar.
“When we join the Rand Union we get access to SA capital markets but we also import a lot of their capital controls,” said Dr Mlambo.
He said the country’s challenges had nothing to do with the multi-currency regime but lack of competitiveness of Zimbabwean products.
“The rand is not a problem as it was strong a few years ago and still we faced challenges, our problem is structural and lack of competitiveness and we need to find the right policies,” said Dr Mlambo. — FinX.