By Anna Chibamu
LOCAL economist Gift Mugano has said government needs to urgently consider dollarizing amid fears of hyperinflation adding that any other measures will not contain the drastic fall of the local currency against the USD and spiking prices.
In an interview with newzimbabwe.com Mugano said that the level of money supplied by the Reserve Bank of Zimbabwe (RBZ) and liquidity from the budget has been too high since last year, reaching at least 1000%.
Recently, Zimbabwe’s has witnessed the ZWL lose value and black market rates reach $3 000. In local supermarkets prices have skyrocketed with government accusing businesses of sabotaging its effort to improve the economy.
- CHASING THE WIND: RBZ sinks Zimdollar value by 26% but black market rates race to 3,000
- PRICES MAYHEM: Street traders offer a better bargain than stores as Zimbabwe’s currency crumbles
- Your silence is too loud says Jonathan Moyo to Finance minister as Zimbabwe struggles with economic woes
“At this stage, we need to dollarise. Last June money supply rose from $1.1 trillion RTGS to $2.3 trillion in December. On average, our money supply liquidity increased by at least 1000 %.
“RBZ is printing money and the level of inflation is now unstoppable,” Mugano said.
He added: “Immediate remedy required now is full dollarisation. Anything else outside this is as good as putting lipstick on a frog to make it beautiful.”
“These prices are explained by exchange rate spiral, draught of confidence and trust. This is why I advised government not to make emotional decisions e.g., opening of imports. If liberalizing imports is a panacea, is government going to open imports 4-10 k products in the market”.
Mugano said government cannot crack on retailers who are increasing prices because of the statutory instrument SI 133.
“Retail shops are using forward rate. Their rate is double the official exchange rate. Retail shops are complying with the SI 133. Due to this reason, government will therefore not be able to crack on the shops.”
Prices of goods and services continue to skyrocket in main supermarkets and Zimbabweans have resorted to street traders.
He further attributed many challenges being faced by the Central Bank to the energy crisis which he described as “a national disaster affecting the economy.”
“Monetary policy at best is blunt. The elephant in the room are treasury payments outside of ZIMRA collections that are causing the rate to run.”
The economist said the introduction of the USD would stabilize the exchange rate and there would be no parallel market to talk about.
Finance minister Mthuli Ncube four years ago described the then Bond Note as “bad money following good money (USD) which he said needed to be scrapped.
However, since then, his stance changed and he now supports the ZW$ against the USD despite the economy dollarising itself.