Last week President Emmerson Mnangagwa indicated that Zimbabwe would soon have its own currency. This should benefit the country immensely from the introduction of its local currency through adoption of various economic activities that are attached to a country using its own currency.
A local currency should assure citizens of the following benefits such as the increased volume of currency on the local market, increased liquidity, increased access to the local market, improved employment opportunities, local import substitution and the revamping of undervalued local activities among other advantages.
The continuous use of foreign currency has over the years led to its scarcity in local areas for domestic use. Shortage of foreign currency results in reduced utilisation of material and human resources. A local currency has a capacity to churn the volume of money to mobilize these resources resulting in increased production. The introduction of a local currency provides a medium of exchange tied to the local market thereby improving the performance of that local market.
A local currency should result in improved liquidity in a country. Local currencies circulate within the country and do not leave that country for another. Local currencies are there to work and create more wealth for a nation. On the other hand the foreign currency component of the multi-currency system, which Zimbabwe has been using since February 2009, has a tendency of being salted out of the country. The foreign currency also runs short when spent on local spent on goods sourced from abroad.
Zimbabwe has been starved from access to its local market during the past years through the continuous use and demand for foreign currency for most of its locally manufactured goods. The current adjustment of prices to meet the parallel market rate of foreign currency exchange has also affected the market performance negatively. By introducing a local currency it creates a new free market for the exchange of goods and services. Participants in the local currency system should be provided with a stable market for the goods and services that they offer.
Through the use of the soon-to-be-introduced local currency, there are increased chances that imports would be substituted. The substitution of imports should be a result of the increased support for local manufacturers to churn out locally goods that were formerly sourced from abroad. A reduction of foreign goods demand and an increased participation of local industries on the local market would reduce the country’s import bill due to a reduction in the demand for imported goods.
Increased employment benefits are also a direct result of a performing economy. Introduction of a local currency should increased new markets for goods and services. Given that money on the local market circulates in abundance, it would enable businesses to manufacture and market goods thereby improve the economy’s performance unlike the current set up where businesses are forced to spent time chasing after foreign currency. Local currencies have a tendency of discouraging harmful economic activities derived such as hoarding and profiteering. In this light, local currencies provide room for new employment choices and opportunities.
For the economy to flourish, the financial services sector should desist from charging high interest rates on loans borrowed to support the domestic market. This is especially important in supporting small enterprises to enhance their growth. On the other hand, relying on a local currency-based loan provides room for growth for local businesses by incentivising them with a start up capital that does not indebt the nation at large.
Zimbabwe remains one of the Southern African countries which does not use of its own currency, this has greatly affected its economic performance negatively. To address this, the nation should join the rest of the world in using its own currency. This should be a source of pride for Zimbabweans as this opens up the country to many economic benefits.