Eddie Cross Says There Are Difficult Decisions to be Made When Reintroducing a Local Currency

Eddie Cross, an economist and biographer for President Emmerson Mnangagwa, stated that the Reserve Bank of Zimbabwe’s (RBZ) “gold-backed tokens” are “a currency without any real support.”

Zimbabwean Gold (ZiG), a digital currency backed by gold, was recently made available by the central bank for use in domestic trade and as a store of value.

However, Cross—a former member of the RBZ’s Monetary Policy Committee—wrote on his website that Zimbabwe lacks substantial gold reserves to support its currency.

According to what Cross has learned, all proceeds from the token’s initial sale were made in local RTGS currency.

He declared that, in agreement with President Emmerson Mnangagwa, no nation has ever been able to grow economically without the use of its own currency.

Zimbabwe would no longer use several currencies, according to Mnangagwa, who just declared as much. However, according to Cross, “the question is how to affect the transition from what we have now and what has to prevail once the deed is done.” He penned:

Initially, we need to have a substitute. In my opinion, a new kind of currency will be issued, and it should be equivalent to roughly 15% of all market transactions.

Although we should still promote the use of electronic means of settlement, we also need money because we are a developing nation with a sizable informal sector.

Second, we must safeguard the Nostro account system and enable actual money to be deposited into these accounts. These monies should then be recognised as “free funds” and made available for both individuals and businesses to pay off debts incurred abroad.

People who have US dollars in cash will be able to bank this and keep access to USD or Rand for particular uses. There should be no touching these balances.

Thirdly, for all current account transactions, we must give up exchange control. Although we dollarized in 2009, we must acknowledge that exchange control is inappropriate in an economy based on free markets.

Fourth, the market for all hard money needs must be entirely free. Every Zimbabwean who needs money should be able to purchase goods at the going rate at their banks and Bureau du Changes.

With the exception of private transactions like remittances, all inflows of hard currency must be changed by the banks into the new local currency at a genuine market price determined by supply and demand.

Fifth, all foreign currencies should be demonetized for use in domestic transactions. This implies that local markets will no longer accept foreign currencies, and that all payments made to hotels, taxis, services, taxes, and other local vendors must be made in local currency.

Retailers and everyone else will therefore need to have faith in our currency, which calls for monetary system discipline. This implies that our local currency needs to be exchangeable for hard currency whenever needed.

That is a challenging list of fundamental choices that must be taken in order to support the fundamental choice to bring back our national currency.

Currently, Zimbabwe has a multi-currency monetary policy system that permits the use of foreign currencies in addition to the Zimbabwean dollar, specifically the US dollar and South African Rand, in domestic transactions.

The local currency and a basket of foreign currencies will be in use until December 2025, per Statutory Instrument (SI) 118A of 2022.

The Presidential Powers (Temporary Measures) (Amendment of Exchange Control Act) Regulations 2022 is the SI that brought in the multi-currency system.