n Journal of Strategic Studies : A Journal of the Southern Bureau of Strategic Studies Trust - Mapping an ideal currency regime for Zimbabwe
|Article Title||Mapping an ideal currency regime for Zimbabwe|
|© Publisher:||Southern Bureau of Strategic Studies Trust|
|Journal||Journal of Strategic Studies : A Journal of the Southern Bureau of Strategic Studies Trust|
|Affiliations||1 University of Zimbabwe and 2 University of Zimbabwe|
|Publication Date||Jan 2010|
|Pages||1 - 15|
|Keyword(s)||Administrative approach and market-based approach, De-dollarisation, Dollarisation and Zimbabwe|
This paper discusses the different options that the Zimbabwean economy can adopt in order to eventually re-introduce its local currency so as to benefit from the use of our own local currency. This is done through reviewing the cases of countries that de-dollarised their economies after having dollarised due to hyperinflation; a situation that Zimbabwe also went through. An exploration of the different options adopted in different countries was done and recommendations were drawn for the Zimbabwean economy. Two main options were found to have been adopted in other countries. The first one is a hands-on approach or an administrative approach which involves forcing back the local currency through prudential regulation aimed at building credibility of the introduced local currency without causing disintermediation. A review of literature reveals that only a few countries have managed to successfully de-dollarised their economies using this route. The second method adopted to de-dollarise is the hands-off approach or a market based de-dollarisation which is based on good macroeconomic performance and a successful disinflation programme. Most countries that adopted this approach have shown significant successes in de-dollarisation; notable success stories being that of Israel, Poland and Egypt. It is therefore against this background that we recommend that Zimbabwe follows a market based approach to de-dollarisation which becomes an endogenous outcome of sound macroeconomic performance. A review of Zimbabwe's macroeconomic framework also indicates that more needs to be achieved on major macroeconomic variables before de-dollarisation is considered an option. The paper also recommends no distinct time frame for de-dollarisation as this is dependent on macroeconomic performance and economic stability.
Article metrics loading...