Steve Hanke: Why Zimbabwe’s multi-currency regime is destined to fail
The Reserve Bank of Zimbabwe announced a 200 per cent policy rate jump last week and a re-dollarization on the same day. Steve joins us to track the domestic currency's value and the road ahead for the Southern African economy. Steve Hanke Professor of Applied Economics at The John Hopkins University joins CNBC Africa for more.
Mon, 04 Jul 2022 20:09:11 GMT
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AI Generated Summary
- Zimbabwe is facing a severe economic crisis marked by a staggering inflation rate of 426% per year, exacerbated by ineffective governance and a history of currency instability.
- Professor Steve Hanke advocates for the official dollarization or implementation of a currency board system backed by US dollar reserves as the only viable solutions to stabilize the economy.
- Hanke dispels the notion of preconditions for a successful currency board implementation and emphasizes the need for transparent leadership to emulate successful economic models like Singapore.
Zimbabwe's economic woes have once again taken center stage as the country grapples with soaring inflation rates and a struggling currency. In a recent interview with Professor Steve Hanke, an expert in Applied Economics at John Hopkins University, he shed light on the root causes of the crisis and proposed solutions to steer the Southern African nation towards recovery. Prof. Hanke highlighted the alarming inflation rate of 426% per year, which is more than double the official figure reported by the government. He emphasized that the current leadership in Zimbabwe, including the Minister of Finance and the central bank governor, has failed to address the economic turmoil effectively. The professor pointed out that the ruling party, ZANU-PF, has more resemblance to a criminal organization than a political entity, further complicating the situation. Hanke stressed that the only viable solution to stabilize Zimbabwe's economy is to officially dollarize or implement a currency board system backed by US dollar reserves. He cited successful examples of currency board implementations in other crisis-stricken countries, showcasing the efficacy of this approach. Despite the challenges facing Zimbabwe, Hanke remains optimistic about the prospect of economic recovery if decisive measures are taken. He debunked the notion that preconditions are necessary for instituting a currency board, citing his personal experience in implementing such systems in various countries in crisis. The professor's resounding message was clear: the multi-currency regime in Zimbabwe is doomed to fail, and a radical shift towards dollarization or a currency board system is imperative. While referencing the Singapore model as a potential roadmap for economic revival, Hanke underscored the need for visionary and corruption-free leadership akin to Lee Kuan Yew, the founding father of modern Singapore. The interview highlighted the urgency of bold reforms and transparent governance to navigate Zimbabwe out of its current economic quagmire.
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