Thursday, 22nd January 2009 at 11:01 am by Longcash
Should Zimbabwe be included in the CMA (Common Monetary Area)?

The Common Monetary Area (CMA) is a setup where Namibia, Swaziland and Lesotho all have their currencies pegged to the South African Rand (ZAR). What this means is that the countries maintain their currencies, but the exchange rate to the rand is 1:1. One is able to use the ZAR in these countries as a means of exchange.

Recently there has been talk of Zimbabwe being included in the CMA set up. The issue is: are both Zimbabwe and South Africa ready for this, and what would be the impact of this?

This arrangement would not make much difference for the Zimbabweans as the majority of the population is using the USD and ZAR as the economy has become more and more ‘dollarized’. What is likely to be of most concern is if this will mean that Zimbabwe will now have to follow South African monetary policies. With a country whose economy has been decimated, high interest rates and runaway inflation, how easy would it be to implement South African monetary policy to restore sanity in the Zimbabwean economy? All the other countries in the CMA do not necessarily follow the South African monetary policy, but their policies are closely aligned to those of South Africa.

The South African government would benefit from such an arrangement, as they will be charging the Zimbabwean government for the use of their currency.

I am of the opinion that Zimbabwe should only be included in the CMA once the rule of law and credible government has been put in place. To include Zimbabwe in the CMA would give an additional life line to the regime that is currently running or is it ruining the country.

Longcash

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Comments

Timothy on 22 January, 2009 at 11:14 am #

Having been in Zimbabwe recently, the prices of goods are already in USD and the prices are inflated compared to what one would pay in South Africa. A loaf od bread could cost you the equivalent of R20 when we are paying R10 here. So I feel for this CMA to work there world first need to be someway of getting the prices of goods in Zimbabwe down first otherwise the vale of the rand would be depreciated because of Zimbabwe and we can not afford that in SA.


Colin Brazendale on 22 January, 2009 at 11:35 am #

LOL!!!… was my first reaction, but I think it is a great idea! But get the Zim gov in line first.


Tawanda on 29 January, 2009 at 5:52 pm #

So now we dollarise, and the government gets to print coupon USD. We have managed to make the rand and USD worthless in this country, but the next move is just gonna be the killer punch. Am sure all these SADC people knew about the budget speech and potential dollarisation. So now we will have a case where there are thousands of USD coupons flooding the streets, a chance for sellers to inflate their prices. We really do need help. Dollarisation can only function if there is a limit to the amount of cash the gvt can print (i.e. ideally 0). Well guess we will just have to wait and see.


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