HARARE, March 20 (Xinhua) — The Zimbabwean government has chosen the rand as the country’s reference currency but will not randify the economy, local media said.
Speaking at the launch of the Short-Term Economic Recovery Program (STERP) on Thursday, Finance Minister Tendai Biti said the government had chosen the rand because South Africa was Zimbabwe’s biggest trading partner and the most competitive country for assessing prices and wages.
“Given the United States dollar price structure we are starting with, and the impossibility of restoring competitiveness through currency devaluation when we are using foreign currencies, it is important that we link ourselves to a currency that is more proximate to us,” said the minister.
The choice of the currency was determined by economic factors as well as the future intention of SADC to adopt a common currency, which inevitably will have to be based on the rand given the dominance of the South African economy in the region.
Opting for the rand as the reference currency should in no way reduce Government’s commitment to multiple currency use, the minister said.
“It is, however, the first step in anticipating an epoch when we can resume use of the Zimbabwe dollar,” he said. It was, nonetheless, necessary to first restore the multi-currency economy to a reasonable and sustainable level of activity.
“STERP, responding to the hyper-inflationary environment, will permit use of multiple currencies for all business transactions, including stock exchange trading, sale of agricultural commodities and payment of salaries.
“All taxes will, therefore, be paid in foreign currency,” the minister said.
The government adopted a multiple currency trading system last month where the rand, the U.S. dollar and Botswana pula operate as legal tender alongside the Zimbabwean dollar.
The US dollar and the rand have, however, been the two major currencies in use in the country. The move was part of efforts to achieve economic liberalisation to pull the economy out of the present challenges.
South African President Kgalema Motlanthe gave Zimbabwe the green light to adopt the rand as standard currency to address the prevailing economic challenges and to assist the inclusive government.
Economic analysts applauded the formal adoption of the rand as legal tender in the country but said this needed to be approached with caution.