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No immediate return for the Zim dollar

CENTRAL bank  chief, Gideon Gono, has said the return of the Zimbabwe  dollar was a “medium to  long term aspiration” after President Robert  Mugabe said consultations were  underway over the possibility of  introducing a gold-backed local currency.

“Following on  the anxiety and interest that the announcement by the  President has generated  since it was made last Friday, it has become  necessary that I shed a bit more  light on the topic of the  re-introduction of a local currency whose name may or  may not be the  Zimbabwe dollar. It is, therefore, safe to refer to it as local   currency,” Gono said in a statement Thursday.

“As monetary authorities,  we advise that as per the announcement  President Mugabe, the re-introduction of  a local currency is rather a  medium to long term aspiration than an immediate, near-term  agenda item  on our radar as the central bank.”

Addressing  supporters as he launched his election campaign in Harare  last week, Mugabe  said he had held discussions with Gono over bringing  back the Zimbabwe dollar  in the medium term adding that after the  elections his Zanu PF party would introduce a strong  gold-backed  currency once the economy has stabilised.

“We have huge gold deposits in this country and  we want to use this resource to back our currency,” Mugabe said.

“If we back our local currency with gold, it is  possible for such a  currency to be equivalent or to be even valued higher than  the US  dollar.

“It all depends on what we do with the gold. We  have been discussing  the issue with Gono but Government will be in overall charge  of  implementing the system.

“We will be able to print our own money and make  sure that our money  does not become a victim of inflation when we print at the  RBZ.

The Zimbabwe dollar was abandoned in 2009 after being  rendered  virtually worthless by hyperinflation. The country has used more  stable  foreign currencies since with the US dollar, the South African and The  Botswana  Pula the most common.

However, Mugabe said people in rural areas struggled  to get the foreign currencies forcing many to resort to barter trade.

“The reality is that we are not able to print the  US dollar and  because of the sanctions there are many restrictions for us to  access  money from the west,” he said.

“The situation is not desirable in the rural  areas because most  households do not have access to the US dollar especially  when they are  not formally employed.

“At times they have to resort to barter trade and  part with their  priced possessions even though they also know that the US  dollar has  strong value.”

Still, Gono said several key conditions would have to  be met before a local currency could be introduced.

These included sustained  macroeconomic stability, accumulation of  adequate foreign exchange reserves of  at least 3 months of import  cover, rehabilitation of key infrastructure as well  as “restoration of  confidence generally and banking sector stability in particular”  among  other issues.

“Additionally,  the local currency would be required to circulate  alongside the basket of  currencies which are currently legal tender in  Zimbabwe and the public will be  free to pick and use a currency of  their choice for transactions purposes,” the  RBZ chief said.

“Importantly  too, is the fact that the sustained stability of the  re-introduced local  currency will also be contingent upon the  accumulation of adequate assets from  the country’s resources, notably  gold, to enable the currency to be fully  gold-backed.

“This means  that government would need to purchase from gold miners,  adequate stocks of gold  in order to build its bullion reserves.

“It is (also) noteworthy  that the local currency will be introduced  at an opportune time in the medium  to long term as part of Government  policy when the above key pre-conditions have  been met and sufficient  consultations made.”

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