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