Full dollarisation of the economy is not an option for the country as the move will see the local industry losing its competitiveness as regional competitors will flood the Zimbabwean market in search of the United States dollars that will be in circulation, an economist has said.
In an interview with Post Business on the sidelines of the Confederation of Zimbabwe Industries (CZI) breakfast meeting in Mutare last week on Friday, the organisation’s chief economist, Dr Cornelius Dube said there will be no incentives for local industries to export if the economy is fully dollarised.
“If we were to dollarise right now, local industry will lose its competitive edge. All aspects of economic growth will fall away. There will be no incentives to export if we dollarise.
“The economic growth opportunities will vanish overnight as we will struggle to compete internationally and we will see Zimbabwe becoming a supermarket economy, simply because firms in Malawi, Mozambique, Zambia, etcetera, will try to penetrate the Zimbabwean market in search of the United States dollars that will be in circulation here.
“We will have a lot of imported products flooding the market, and this will destroy our growth prospects and kill our employment opportunities,” said Dr Dube.
He added: “We should try to stabilise our currency. Government is already trying to control inflation and stabilise our exchange rate. We should ensure the stability of the economy.”
Dr Dube called for incentives for players in the agricultural and manufacturing sectors.
“We need economic transformation, we need to transform the way we are doing our agriculture to ensure that there are incentives for the farmers to go back to the field. There should also be value for the contractors that are supporting the farmers.
“Transformation should also happen in the manufacturing sector. We need to localise our value chain so that we have value preservation across the whole chain. We are exporting a lot of gains and value from the economy.
“Every dollar should be retained across the value chain,” said Dr Dube.
On the issue of importation basic goods, Dr Dube said the cost of doing business in Zimbabwe remains high.
“The challenge of local industries is that they are failing to compete effectively with imports because the cost of doing business in Zimbabwe is yet to be addressed.
“If we open up for imports at a time when the local industry is struggling to compete, we are likely to see most of our local products vanishing from our shelves and being replaced by imported goods.
“We need to understand the context of this policy, it says those with free funds are allowed to import. Now, how feasible will it be for those importing using USD to sell in local currency?
“This measure will most likely increase the dollarisation sentiments because all the imports that will be brought in using free funds will be sold in USD.
“These products will be flooding the downtown shops where there is an informal USD economy. If a product imported with free funds is put in a formal retail shop, most of us will buy it using local currency and it will be difficult for the importers to recover their investments,” said Dr Dube.
— Manica Post