Dollarisation

As Paul Keating would say, the pet-shop galahs are all talking about “de-dollarisation” – that is, the demise of the greenback as the world’s reserve currency.

But after winning, he tapped Luis Caputo, a former Central Bank president, to be his economy minister and one of Caputo’s allies to helm the bank, appearing to have put his much-touted plans for dollarisation on hold.

On one hand, the grouping is not yet offering anything concrete to justify such drastic measures as de-dollarisation.

We anticipate a continuation of the current policy environment anchored by mult-icurrency trading system with increased dollarisation.

Even within BRICS, there is little consensus on how to approach de-dollarisation.

Several currencies, including the euro, could benefit from de-dollarisation.

As such, the informal sector players only sell foreign currency to the parallel market due to higher returns at the parallel market while the use of dual pricing in a de-facto dollarisation environment makes buyers prefer to use the US dollar.

Zimbabwe is projected to have registered economic contraction for the first time last year, after enjoying stellar to moderate growth since dollarisation in February 2009, which, however, started to slow down in 2012.

And between January and March this year, Zimbabwe registered a positive current account balance of US$200 million, also the first since dollarisation in 2009, which provides signs that the country’s macro-economic fundamentals are falling in place.

Dollarisation of the economy.

However, it is critical to point out that if there is no discipline in growing broad money supply on the part of the central bank and confidence in the monetary policy as is the case in Zimbabwe, de-dollarisation will be mission impossible.

Mugabe left behind an economy wrecked by hyperinflation, dollarisation and deeply entrenched corruption, and a raging political rivalry between the country's two largest political parties, ZANU-PF and the opposition MDC.

There should be a level of tolerance by government as the cause of this whole re-dollarisation process is the shortage of cash.

The Zimdollar helped hold other worries of post-dollarisation," she said.

Chakravarti’s argument, during his presentation to legislators at a post-budget seminar for MPs at a Harare hotel, were that dollarisation had not succeeded in any country in the world on a long-term basis, and was unsustainable.