“Complete dollarization of Zimbabwe’s economy will never happen”
ZIMBABWEENS need to cherish the partial dollarization that is in place and stop dreaming of full dollarization, Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya said yesterday.
Speaking during discussions at the Zimbabwe Chamber of Mines annual conference, which ends here today, Dr Mangudya said Zimbabweans were “full of negativity” about the problems happening in their country, which was not the case in countries that could face much worse problems than those experienced locally.
“Let’s cherish partial dollarization. As we continue under partial dollarization, let’s not undermine the other currency because of the US dollar,” Dr Mangudya said.
“The problem with Zimbabweans is that we always wish each other ill. When you listen to conversations, you just hear people say ‘zvakaoma’ (things are hard). There’s nowhere in the world where it’s easy.
“Just this other day, (US) President (Joe) Biden was concerned about infant formula shortages in his country. President Biden invoked the Defense Production Act to address infant formula shortages.”
The defense production law invoked by President Biden requires formula suppliers and manufacturers to fulfill orders from local companies before other customers, in order to remove bottlenecks.
The US President also authorized the US Department of Defense to use commercial aircraft to transport supplies of federally compliant formula from other countries to the United States in what was called “Operation Fly”. Form”.
The formula shortages were triggered by Abott Nutrition’s recall of the product for safety reasons and general supply chain challenges across the globe due to geopolitical issues in Eastern Europe where the Russia undertakes a special military operation in Ukraine.
Due to supply chain disruptions, gas, fuel and food prices have risen by around 40% globally, and cooking oil shortages have even been recorded in the UK.
Dr Mangudya said the price of a tonne of cooking oil has risen from US$900 in recent months to around US$2,000 today, due to supply chain disruptions. He said that since the challenges were global, there was no need to be “too negative”.
“The power of negativity overpowers positivity. We must be positive. As long as I live, I am positive. I thank the Lord for the gift of life. Why are we destroying our economy?
“We want to tame inflation, but it’s not just a matter of RBZ, it’s not a matter of government alone, it’s everyone’s task. Let’s defend our currency, we don’t want power inflation is eating us up.
“Who are these people who drive up inflation at night or in the morning? We are still looking for them and we have suspended some companies from borrowing from banks because they were borrowing speculatively.
Dr Mangudya said investigations into the companies’ illicit activities are still ongoing and the nation will be updated in due course.
Dr Mangudya said full dollarization was “not a vaccine” or a cure for inflation, but that confidence in the local currency was essential.
He gave the example of the American dollar which is not backed by anything, but which has value, thanks to people’s confidence in it.
Until 1971, the US dollar was backed by gold until US President Richard Nixon broke the direct convertibility of currency into gold to curb inflation and prevent foreign nations from overloading the system by trading their dollars for gold.
Dr Mangudya said full dollarization would be detrimental to the economy, as seen in the period 2009 to 2018, adding that apart from Panama which receives support from the United States, no other country had full dollarization.
“As Zimbabwe, we are alone and we cannot take the path of full dollarization. If you were dreaming of full dollarization in Zimbabwe, it must stop. Let’s stop the speculative attacks on our currency. People who indulge to speculative attacks on our currency are the same as witches.”
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