By Reason Razao | Senior Reporter
ECONOMIST Gift Mugano has predicted a total collapse of the ZWL following a series of measures by Finance and Economic Development Minister Mthuli Ncube aimed at stabilising the local currency, containing runaway inflation.
Mugano said liberalising the exchange rate when both exchange rates and inflation are ‘boiling’ is as good as putting paraffin on fire.
The economist also revealed that the same measures being implemented by Ncube were proposed in 2021 but he turned them down.
“Policy makers must be listening and engaging and desist from the silo mentality. This is what has taken us this far. We can do better if we harness all our brains and discuss a subject matter robustly and come up with an informed policy position,” Mugano said.
“For avoidance of doubt, those who followed my comments on various platforms agree with me that I consistently provided recommendations focused on reducing money supply and liquidity but they fall on deaf ears.
“I consistently argued for the government to scrap export retention, domestic foreign currency retention, exclusive use of ZWL by the government in all government transactions and payments to government (all taxes and levies) this would have created demand for ZWL.”
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Mugano said during pre-budget consultations late October 2021, Ncube refused to adopt proposed economic measures, arguing that he also needed USD.
“On record, respectfully, Parliament of Zimbabwe requested me to come and present in front of Ncube during pre-budget consultations late October 2021. I was a discussant to Ncube and John Mangudya’s presentations.
“I literally begged Ncube to exclusively use the ZWL in all government transactions, payment of all taxes and statutory obligations and leave the market to transact in USD with other stakeholders except the government.
“This would have created demand for the local currency and saved it from collapse. Sadly, Ncube refused and argued that he also needed USD,” said the economist.
According to Mugano, the only way to revive the economy now is to dollarise.
“Ncube is now implementing the very same measures which I proposed then, liberalisation of exchange rate, partial use of ZWL and scrapping of 15% domestic foreign currency retention, that is, too late to save the situation.
“In fact, liberalising the exchange rate when both exchange rates and inflation are boiling is as good as putting paraffin on fire.
“The only option remaining is to bury it and deal with its ghost in the form of the USD,” he said.
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