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Business Reporter
NO country has ever been able to reintroduce its domestic currency in the history of dollarisation due to the costs associated with such a decision and Zimbabwe may not be able to do so at least in the next five years, a United Nations Development Programme senior official has said. UNDP senior economic advisor in Zimbabwe Mr Amarakoon Bandara told a Zimbabwe National Chamber of Commerce annual congress in Victoria Falls that Zimbabwe was not ready for reintroduction of local currency, even under a different name as the fundamentals were not there yet.

“One of the primary conditions you need to have in place is restoring public confidence in a local currency. Basically, this means you have to eliminate building of inflation expectations,” Mr Bandara told delegates.

“These are the indications which show that Zimbabwe is not at the level where it can reintroduce its local currency. It may need to grow the economy, increase revenue inflows and start attracting significant investment first before thinking about the local unit,” the UNDP economic advisor said.

He said Panama has been dollarised since 1904 while El Savador and Ecuador also adopted the US$ much earlier than Zimbabwe. “And to date, these countries have not looked back on dollarisation.”

Zimbabwe dollarised in 2008 at the height of its economic crisis, punctuated by hyperinflation and uses a basket of currencies anchored by the US dollar.

“What is required in the medium to long-run — I am not talking even about short-run because it is not an option — is that the country builds, restores confidence in the local economy. Economic stability is also essential. You need to manage debt stock while fiscal and monetary discipline is required,” Mr Bandara said.

He added that it was also a prerequisite to have policy credibility and consistency before entertaining thoughts of bringing back the local currency.

“So it is a long way to go, say in the next five years. There is no way that Zimbabwe could introduce the local currency.”

The growing informal sector and rising imports, instead of savings, were also indications the economy is a long way from the desired destination.

“But you can work on it; to get to that required fundamental scenario that might boost the confidence of Zimbabweans so that you can come up with a different solution, but remember, nowhere in the history has a country which has introduced the dollar or dollarised, gone back,” he said.