When Zimbabwe eliminated its national currency and replaced it with the multi-currencies in 2009 the hope was to achieve economic stability and growth after experiencing a severe economic meltdown and hyperinflation. The question is, was adopting the multicurrency system a quick remedy for economic stability in Zimbabwe? The answer is yes and no. The argument is that the benefits of multicurrency adoption or dollarization always come at a cost. Whether the benefits of dollarization become greater than the costs depends on how the dollarized country manages the dollarized or multicurrency regime. This presentation seeks to unpack the benefits and costs that became inevitable when Zimbabwe decided to eliminate its national currency and adopt the multi-currencies and the way forward towards sustained economic growth in the changed circumstances with the view of becoming a middle-income economy by 2030. The continued adoption of the multi-currencies or dollarization effectively means that the country needs to improve its external revenue inflows in terms of lines of credit, foreign direct investment inflows and export earnings as well as improved domestic revenues mobilisation through taxes as the monetary authority continues losing the control of the monetary supply. Achieving sustained economic growth and transformation into middle-income economy would certainly require prudential management of the multi-currency regime, which demands austerity measures that indeed may be painful to go through. The current economic situation that the country is faced with is a clear result of an oversight on the need to prudential manage the multi-currency regime right from on set and this defines the greatest missing link in the Zimbabwean experience of dollarization or multi-currency reform adoption. One of the consequences of dollarization or multi-currency adoption was the opening of the economy to capital mobility. This aspect created a serious loophole for externalisation of the foreign currency in Zimbabwe and unfortunately, there was lack of legal and technical mechanisms to curb the unlawful externalisation of the foreign currency until it was too late resulting in the manifestation of the liquidity crisis. What it meant was that Zimbabwe now had a common currency with its main trading partners, for example, the Rands with respect to South Africa and the United States dollar with respect to other trading partners that is, lowering transaction costs by eliminating depreciation risk. Prudential management of the multi-currency regime could have taken advantage of all these benefits, quickened the economic recovery, and chatted the right path to sustained growth. While multi-currency adoption promoted, but did not guarantee, fiscal discipline, an efficient financial system in the country, the adoption of institutional reforms, and financial and trade integration with international markets would have been realised by now had the multi-currency regime been prudently managed.
Keywords: Multicurrency regime, Sustained growth, Economic development, Vision 2030, Structural reforms