Finance Minister and Economic Development Minister, Mthuli Ncube, on Wednesday, told parliamentarians that Zimbabwe will wipe out its banking sector completely if it adopts the US dollar as the sole currency.
Responding to a question in the National Assembly over the eroded salaries for civil servants and why the Government refused to dollarise, Ncube said dollarisation would be a bad idea and no finance minister worth his salt would do that. Ncube said:
Let me… explain what will happen under US dollarization which is what happened during the Unity Government.
What happened is that there was deflation and deflation means that we had negative growth and that was totally undesirable.
We also had an increase in bad debts and that is why we ended up creating ZAMCO to clean up the problem that was created by the USD.
The competitiveness of our industry was basically shut down. We just became a nation of importers and we de-industrialised and that destroyed our industry which has only been resuscitated by the introduction of the Zimbabwe dollar during the Second Republic.
Madam Speaker Ma’am, do you not think that it was ironic that during the USD regime, we had no foreign currency?
We had no reserves. We could not even pay our foreign debts. We only began paying our foreign debts after introducing the Zimbabwe dollar. It has given us the leeway to do what we do.
What we did during the Unity Government, we could not fix our roads. We borrowed money from South Africa to do the Plumtree-Harare-Mutare Road.
This time around, we are not borrowing, we are using our own resources and that capability has been afforded by the introduction of our own domestic currency.
If you introduce the USD only, tomorrow you will wipe out the banking sector completely because you have to convert all those Zim dollar balances into USD.
You will wipe out the bank balances of companies. Is that what you want?
You will create a serious situation if you adopt the USD in this country. It is a very bad idea.
No Minister of Finance should want that because it means you are walking on one macroeconomic tool when the toolbox is incomplete.
You only have a fiscal policy but no monetary policy. So, it is a bad idea.