wow-inequalities/02-data/intermediate/wos_sample/e72eb9df16c71451175c59546eb0c733-wessels-buks/info.yaml

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2023-09-28 14:46:10 +00:00
abstract: 'Dollarisation as Economic Solution for the Zimbabwean Demise The
Zimbabwean economic and political malaise has been going on for longer
than a decade and has deteriorated unabated Runaway hyperinflation
reaching unthinkable proportions, an almost hundred percent unemployment
rate and a shattered currency with literally no external value or esteem
characterise this demise. Fiscal profligacy funded by an ever increasing
fiscal deficit has played its part in this socio-economic tragedy. This
state of affairs would not have been possible if the Reserve Bank of
Zimbabwe had fulfilled its role as protector of the nation currency.
Sadly the Bank slavishly accommodated the government request for
printing more money and did not render any sign of independence from
government as a respected central bank should have done. As in many
other cases of hyperinflation, this weakness provided the basis from
which the evolving tragedy gained momentum. The gigantic proportions of
the continuous socio-economic and political tragedy predict an even
bleaker future for the country if not attended to in a decisive way.
No instant political or economic solution exists for this appalling
situation, but economic restoration has to start with certain basic
steps of economic reform. This paper suggests official dollarisation as
an alternative exchange rate regime with which to clear up the economic
disorder that currently characterises the economic scene. The paper
explains the term ``dollarisation{''''}, its features and the underlying
rationale of the regime as a super-fixed exchange rate system for
Zimbabwe. Thereafter the possible advantages and disadvantages that
Zimbabwe can obtain from the system are highlighted, accompanied by a
brief discussion on randisation as a possible alternative solution.
Especially important among the advantages is the fact that dollarisation
will help to restore the lost credibility of the Zimbabwean
policy-makers since it will now be imported externally from an anchor
country and its currency. This will not only substantially decrease the
inflation and interest rates, but it will also contribute to promoting
saving, investment, economic growth and employment. It will,
furthermore, stabilise the dysfunctional Zimbabwean credit system,
enhance long term lending contracts and correct the misallocation of
resources caused by, hyperinflation.
These benefits must be balanced by certain costs of dollarisation,
especially the loss of seigniorage income, the loss of monetary autonomy
and national pride, as well as the loss of the
lender-of-last-resort-function of the central bank. However, in the case
of Zimbabwe these costs are found to be thoroughly overshadowed by the
benefits derived from dollarisation. In addition, the Zimbabwean
situation and the current stance of its economy actually fit the
prerequisites for a country that should seriously contemplate
dollarisation.
Although dollarisation is supported as a possible solution for Zimbabwe,
randisation may also work but will have to be considered with care.
South Africa is indeed the biggest trading partner of Zimbabwe and also
has deep financial ties with the latter Nevertheless, the volatility in
the exchange rate of the rand and the possibility of loan default on
South African loans to Zimbabwe are risks in need of contemplation.
Another but less credible policy alternative for Zimbabwe, is to adopt a
currency board arrangement where the exchange rate of the Zimdollar is
not only firmly fixed to the South African rand, but also fully (100 per
cent) covered by rand reserves cis a back-up measure of credibility.
Yet, under the current circumstances dollarisation presents itself as a
more likely system with which to obtain rapid and trustworthy results.
Although dollarisation on its own will certainly help, it will not pose
a ``quick-fix{''''} for the Zimbabwean demise. Dollarisation can not
compensate for corruption, disruptions in the social structure and a
lack of transparency in the political and economic system. Furthermore,
it can not compensate for a lack of human prudence in decision-making, a
lack of protection of property rights and the absence of a rule of law.
The latter aspects require fundamental and credible reforms on the
political and juridical front, without which no economic rescue package
will have any success whatsoever'
affiliation: 'Wessels, B (Corresponding Author), Univ Oranje Vrystaat, Dept Ekon,
Bloemfontein, South Africa.
Univ Oranje Vrystaat, Dept Ekon, Bloemfontein, South Africa.'
author: Wessels, Buks
author-email: wesselgm@ufs.ac.za
author_list:
- family: Wessels
given: Buks
da: '2023-09-28'
files: []
issn: 0041-4751
journal: TYDSKRIF VIR GEESTESWETENSKAPPE
keywords: 'Zimbabwe; economic reconstruction; dollarisation; hyperinflation;
central banking; monetary policy'
keywords-plus: DOLLARIZATION
language: Afrikaans
month: MAR 10
number: '1'
number-of-cited-references: '41'
pages: 50-65
papis_id: 3eb358916ed4e84fc2c681dd37582b66
ref: Wessels2010dollarisationeconomi
times-cited: '0'
title: Dollarisation as Economic Solution for the Zimbabwean Demise
2023-10-01 08:15:07 +00:00
type: article
2023-09-28 14:46:10 +00:00
unique-id: WOS:000275773800004
usage-count-last-180-days: '0'
usage-count-since-2013: '17'
volume: '50'
web-of-science-categories: Social Issues
year: '2010'