Calls for Zimbabwe to adopt the use of the rand as a currency of choice have grown again as the preferred US dollar is fast disappearing, resulting in an unsustainable liquidity crunch. The business community – led by the Confederation of Zimbabwean Industries (CZI), economist and University of Zimbabwe lecturer Professor Tony Hawkins and government adviser Professor Ashok Chakravarti – has called on Zimbabwean authorities to adopt the rand.
Speaking at the CZI 2017 Economic Outlook Symposium on Thursday, CZI president Busisa Moyo said his organisation will approach government with a draft legislation to push for the adoption of the rand as the main transacting currency. “We have been talking about randisation and individual members of CZI have come out strong on randisation, and I think we need to have some sort of action towards this,” said Moyo. His sentiments were echoed by Chakravarti, who said “there are no economic issues in adopting the rand tomorrow”. He added: “All it needs is a simple law, a statutory instrument from government with an exchange rate redenomination of all the US dollar balances, salaries, prices, everything in rand saying that from tomorrow the rand is the currency of circulation and everything will be denominated in rand. “We do not have to join the Common Monetary Area to adopt the rand.”
The calls come at a time when Zimbabwe is facing serious cash shortages as well as a crippling liquidity crisis. According to Chakravarti, Zimbabwe has $304m in hard cash in circulation – including $73m in bond notes – as of January 2017, about a third of optimum demand, reflecting a worsening liquidity crisis. “Cash to deposit ratio has decreased from 35% in 2009 to 5% in January 2017. “The amount of cash held in nostro accounts declined by 61.6% from $424m in 2009 to $163m as at November 2016,” said Chakravati. “Cash to deposit ratio should be at least 15%,” he said. He added that given the deposits of $6.2bn, the country needs $900m in cash to have adequate liquidity.
Chakravati said adopting the rand will significantly change the whole situation with regards to liquidity. “We will have plenty of rand around. I can assure you,” he said.