HARARE, June 12 (Xinhua) -- Reserve Bank of Zimbabwe Governor John Mangudya on Monday said adopting use of the South African rand as the country's main transacting currency will not help solve Zimbabwe's current economic challenges.
The governor said the economic challenges could not be addressed by a currency solution alone but required a holistic approach addressing structural problems in the economy.
Zimbabwe adopted use of multiple currencies in 2009 after its currency had been rendered worthless by a decade of hyperinflation.
The South African rand is among the nine currencies in the multicurrency basket. However, the United States dollar became the dominant currency in the economy, leading to its shortage starting last year due to low export earnings.
The central bank reacted to the shortage by introducing local bond notes in November last year to try and address the cash shortages but the cash shortages are persisting and worsening.
This has led some in the country to call for the adoption of the rand to ease the cash crunch, arguing that it would make life easy since South Africa is Zimbabwe's largest trading partner.
However, Mangudya on Monday shot down the proposal to adopt the rand, saying Zimbabwe's economic challenges were not being caused by a currency problem.
"I don't believe that Zimbabwe's economic challenges are a currency phenomena. Zimbabwe's challenges are of a structural nature," he said.
He cited high expenditure, economic indiscipline, ease of doing business and high cost of doing business as some of the structural problems plaguing the economy.
"You don't attend to these structural challenges using a currency but we need to take decisive decisions dealing with the policy framework to deal with these structural problems," he said.
He said Zimbabweans must not sugar coat economic challenges bedeviling the nation and reduce them to a currency issue, pointing out that the nation needed to increase its productivity to earn more foreign currency.
The governor, meanwhile, urged Zimbabweans to continue embracing use of plastic money in the wake of cash shortages so that the country can reserve the little foreign currency in Nostro accounts for critical imports like fuel, electricity and raw materials.
He said Zimbabwe was not generating enough foreign currency to meet local demand, hence the cash shortages. Enditem
