At the centre of Zimbabwe’s economic problems is the question around currency. Over the past ten years, Zimbabwe has had a perpetual currency headache, off course with relief in the years 2009 to 2013 when the country enjoyed widespread economic growth and stability under a predominantly United States dollar dominated economy. 2014 and beyond witnessed the recurrence of currency problems, leading to the Central Bank introducing the bond notes under a $200 million “export incentive” scheme underwritten by Afrexim. This piece will seek to explore possible measures that the economy might pursue to solve the economy’s currency dilemma. I will also try and predict a possible timeline (see attached diagram) that will guide all the possible policy options that can be adopted there in.
Restoring multicurrency (12 to 36 months) After the decommissioning of the bond notes, there is need to restore a fully-fledged multicurrency system that allows a basket of foreign currencies to circulate as legal tender. This strategy should be implemented together with a sustained period of export oriented production in which the economy builds enough import cover and reserves to be able to sustain its own currency beyond 2021. In this regard it will also be prudent in the 12 to 36 months to make sure budget deficits are kept at a very minimal through a broad austerity programme that prioritises resource allocations towards Gross Fixed Capital formation as opposed to recurrent expenditure. Equally important under this period will be the need to open avenues for foreign direct investment through a deliberate policy that ensures the economy is a safe and reliable investment destination that guarantees security of investments and a fairness for all who would have shown faith in Zimbabwe by investing their capital. In order to restore and sustain the circulation of multicurrency, Zimbabwe would need to take deliberate steps to harness the serious upside potential in our key sectors: Mining, Agriculture and Tourism. These three sectors have the easiest capacity to generate much the needed foreign currency. On top of that there will be need to engage on a campaign to increase remittance inflows into the economy using formal channels riding on the massive Zimbabwean populations in such countries as the UK, United States of America, Australia, Canada, New Zealand, South Africa and Botswana. Opportunities also have to be opened for Zimbabweans in these countries to be able to invest back home aside of remittances.