Cape Town – A central bank official said it would be “prudent” for Zimbabwe to use the rand rather than the US dollar as the dominant currency as the southern African country seeks ways to ease a shortage of foreign exchange.
“We can benchmark pricing with the rand, which we can’t do with the dollar, because we trade almost nothing with the US,” Kupukile Mlambo, Deputy Governor of the Reserve Bank of Zimbabwe, told a gathering of business leaders Wednesday in the capital, Harare.
Zimbabwe abandoned its own dollar in April 2009 as runaway inflation rendered it worthless, using instead a mix of foreign currencies that now includes US dollars, pounds, euros, rands, yuan and Botswanan pula. In an effort to address a shortage of banknotes, the government in November started printing and distributing dollar-denominated notes backed by reserves in the US currency, prompting protests from locals skeptical about the new currency’s value.
Zimbabwe conducts 60% of all its trade with South Africa, according to the country’s Treasury, and three million of its citizens are estimated to live in its southern neighbour after fleeing economic hardship at home.
The rand has strengthened about 9% against the dollar this year, more than any other African or emerging-market currency tracked by Bloomberg. Zimbabwe’s largest business lobby group in November called on the government to adopt the rand as its “reference currency” instead of the dollar.
“We will be happy in the central bank if people use the rand more than they would use the other currencies in the basket,” Mlambo said. “But because people only store value, they prefer to use the dollar – that’s where the challenge is.”