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

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
type: article
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'