Zimbabwe is weighing the reintroduction of the national currency it abandoned in 2009 in favor of the U.S. dollar as it struggles to meet its monthly wage bill, three members of the ruling party’s decision-making body said.
While the revival of the Zimbabwe dollar would allow the government to print money to meet its needs it could damage the popularity of President Robert Mugabe’s Zimbabwe African National Union-Patriotic Front, said the people, who asked not be identified because the discussions are private. Patrick Chinamasa, the country’s finance minister, didn’t answer calls made to his mobile phone.
Zimbabwe abolished its national currency in 2009 after inflation surged to 500 billion percent the year earlier, according to International Monetary Fund estimates, and the party lost its parliamentary majority in elections while retaining the presidency. Last year Mugabe, 90, won re-election and Zanu-PF defeated the Movement for Democratic Change to regain control of parliament and end a four-year coalition government.
The party’s politburo is trying to decide whether it will do more harm to its image by reintroducing the currency and meeting its wage commitments or continuing to use foreign exchange, protecting the country’s citizens against inflation, the people said. A majority of politburo members are currently against its reintroduction, they said.
Between 2000 and 2008 the economy contracted by 40 percent, according to the IMF, and millions of Zimbabweans emigrated to countries including neighboring South Africa. Since the use of the dollar and other currencies including the South African rand was permitted in 2009 the economy has expanded every year.
“We’ll just die, we can’t go back to 2008,” said Jehosephat Dambadza, a furniture-maker in Harare, the capital, said in a telephone interview. “If they bring back the dollar it will quickly deteriorate to worse than then, we’ll have nothing.”
This year the economy has slowed with sales of consumer goods falling as much as 30 percent in February and revenue collection declining by a 10th, according to the Treasury. Consumer prices fell for a second month in March, while wages accounted for 58 percent of government expenditure in February. Pay increases agreed to by the government earlier this year were delayed.
Together with soldiers and police Zimbabwe has about 285,000 government workers.
“It’s physically possible to reintroduce the currency,” Christie Viljoen, an economist at NKC Independent Economists in Paarl, South Africa, said in an interview. “They could force civil servants to take the Zimbabwe dollar as payment and they could force banks to stock them.”
Chinamasa said the government will alter its plan to force all foreign-owned companies to sell or cede 51 percent of their assets to black Zimbabweans. The government will now impose local ownership rules that will differ “sector-by sector,” he told reporters in Harare yesterday.
Companies including Impala Platinum Holdings Ltd. and Anglo American Platinum Ltd. have ceded stakes in their Zimbabwean assets. Banks have also been involved in talks with the government.
“Zimbabwe has big economic problems. They have a huge current account-deficit and a fiscal shortfall,” Viljoen said. “They need money from somewhere and they’re running out of options. Reintroducing the Zimbabwe dollar could be an option.”