Wednesday, June 01, 2011

The Future Monetary System of Zimbabwe

I blogged recently about Zimbabwe's now defunct 100-trillion-dollar note. Currently, citizens of Zimbabwe are free to use US Dollars and South African Rand for their transactions. Since inflationary finance and seigniorage are often key political tools in developing countries, one should not be surprised if Zim notes make a return in the near future. New Zimbabwe reports:
Finance minister Tendai Biti says the country needs at least six months import cover and a sustainable track-record of economic growth, inflation stability and above 60 percent capacity utilisation in industry before the Zim dollar can be brought back into circulation.

However central bank chief, Dr Gideon Gono said the country should consider adopting a gold-backed currency.“There is a need for us to begin thinking seriously and urgently about introducing a Gold-backed Zimbabwe currency which will not only stable but internationally acceptable,” he said in an interview with state media.
Whether Zimbabwe will adopt a commodity-backed system remains to be seen. I think it is highly unlikely. But it is encouraging to see that option on the table.


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