It is remarkable to note that Zimbabwe currently uses nine foreign currencies as its official currency, with the Chinese yuan also included in that basket.
Interestingly, there is no single shop that displays its prices in yuan in the republic.
Many people don’t know the yuan or bother to know its exchange rate to other main currencies such as the rand and US dollar. That alone tells you that no one will accept the yuan in the country, at least for now.
However, recent developments in China call for a serious rethink of our current currency preferences.
It all started with the formation of the Asian Infrastructure Development Bank — a new international financial institution that checkmated the Bretton Woods institutions — in October last year, head-quartered in Beijing.
And China is now a global economic superpower as it produced 17 percent of the world’s gross domestic product, ahead of America.
But it is the latest events in China that should really compel us to examine the role that the yuan can play in the economic transformation of our country.
China recently launched a global payment system — China International Payment System — which envisages to internationalise the yuan by facilitating cross boarder transactions in the currency, while also checkmating the US dollar in the process.
Prior to this development, the yuan was said to be the fourth most used currency for cross boarder payments. The International Monetary Fund is also meeting next month to decide on the inclusion of the yuan into its Special Drawing Rights (SDRs) currency basket, with the Fund’s managing director, Christine Lagarde, on record saying that the inclusion of the Asia giant was “ a question of when, not if.” The SDR is an international reserve asset for supplementing official reserves of the Fund’s member states.
China is Zimbabwe’s third biggest import market after South Africa and Singapore and seventh biggest export market after South Africa, Mozambique, Belgium, Zambia, United Arab Emirates and Botswana — in that order.
The above is the first justification of why the yuan should be given more room in the country, as opposed to the current situation where the US dollar has sickening dominance.
The US dollar is the very currency that is being printed and governed by a government that still considers Zimbabwe a threat to its foreign policy and — lest we forget — still maintains tough economic sanctions on Zimbabwe. In any case the US dollar has not been meaningfully contributing to the competitiveness of the country, as the central bank indicated that the green-back appreciated by 45 percent against the South African rand in the past six years.
That has strongly discouraged exports while imports proliferated — leaving us with a widening trade deficit. That is not healthy in an economy where exports are the main source of liquidity.
So this leaves us stuck with the dollar while the economy shrinks.
Zimbabwe needs a currency regime that supports its growth agenda and anything short of that will only be undermining the envisaged acceleration of sustainable socio-economic transformation.
We need a currency regime that supports industrialisation. Many manufacturing companies are cutting down on their export markets, thereby cutting on their productive capacities as exporting becomes more expensive and the US dollar continues to appreciate against the currencies of our main trading partners.
This is why we should now consider giving the yuan a leading role in our economy. The first step is to use this currency in our economy with more education be availed about the security features of this currency to ameliorate counterfeiting and banks regularly publishing how it is trading to other major currencies.
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