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‘Economy now dollarised’

HAVE you ever paid US$20 for a blood pressure or temperature check? Or parted with the greenback to have a mandatory medical examination before being hired by a new employer?

 

This has become a new way of accessing “efficient and reliable” medical service in a country whose health delivery system has almost collapsed.

Specialists in the medical field, property owners as well as manufacturers and ordinary Zimbabweans have not been spared from this thriving form of payment that has become common in an economy enduring close to a decade of recession.

A snap survey by the Zimbabwe Independent has revealed that virtually all business operations in the country are now charging foreign currency despite this being illegal.

A number of institutions, ranging from property owners, private medical institutions to retailers are now “dollarising” services and basic commodities tendered to the poverty-stricken Zimbabweans whose local currency is depreciating at an unprecedented rate.

In Harare, most private medical institutions prefer payments in foreign currency to the local currency. Daily cash withdrawals are now pegged at $300 and prices are ever changing – sometimes daily or even hourly.

A private dentist operating in the Avenues area said the high annual inflation rate, which the government said is over 2,2, million percent, while independent economists claim to be close to 10 million percent, was forcing the few remaining health professionals to charge in foreign currency.

“We have since stopped transacting in the local currency,” said the dentist who requested anonymity. “We have no confidence on the fast-depreciating dollar. We import most of our equipment and drugs and this is the only alternative that enables us to restock. More so our employees face the day to day reality of paying rentals and other services in foreign currency.”

Consultation at the government-owned dental section at Parirenyatwa Hospital costs $50 billion ($5 revalued), notwithstanding the monetary value of enduring the long winding queues.

When contacted for comment on this development Health minister David Parirenyatwa said he was aware of the dual pricing system.

“This is against the law and it’s a cause for concern which the ministry is going to look into,” he said.

Dollarisation now also applies to rentals of flats and houses around Harare which range between US$150 to $300 per month depending on location and proximity to the city centre.

In most high-density suburbs, which include Warren Park and Kuwadzana, Dzivaresekwa and Chitungiwza, property owners and some real estate agents are charging between R100 and R200 for a single room and up to R500 for a six-roomed house.

Cross boarder traders are now also charging their wares in foreign currency. A pair of female sandals is being sold at Avondale flea market for R300 or an equivalent in local currency using the parallel market rates.

Announcing the mid-year Monetary Policy Statement a fortnight ago, Reserve Bank governor Gideon Gono warned that this trend of dollarisation, which he described as a “hyper-speculative mode”, would paralyse the economy if not stopped.

Acting Attorney-General, Justice Barat Patel recently said charging goods and services in foreign currency was in contravention of the country’s Exchange Control Act and warned that perpetrators would face the full wrath of law.

While exchange control laws prohibit this emerging trend of foreign currency transacting, economic analysts are divided over the issue. Some economists said dollarisation would not work in the country, while others argued that it could be used to increase forex inflows into the nation’s reserves.

Economic analyst Juniors Marire said removing prohibitions from transacting in foreign currency could “soft land” the economy. He said the formal inter-bank rate that was introduced by the central bank in April to promote foreign currency inflows was not yielding much.

“What makes inflows into the formal forex market small is because the exchange rate was not liberalised fully,” he said. “The priority list (the RBZ foreign currency issuance priority) according to which forex is sold is tantamount to fixation of the exchange rate.”

United States-based currency reformist Steve Hanke, in his paper prepared for Imara Holdings, said dollarisation and an establishment of a Currency Board to replace the central bank could improve foreign currency inflows.

“If official dollarisation goes no further than the use of a foreign currency, it does not achieve its full potential,” he said.

“Combining financial integration with official dollarisation, in which a leading international or regional currency serves as the anchor currency, helps a dollarised country to tap into a large and liquid international pool of funds.”

Zimbabwe, according to Hanke, could adopt “randisation” which entails trading in South African rands. The Southern neighbour is the country’s top trading partner.

South America’s emerging giant, Argentina, and quite recently Ecuador and El Salvador-2000-2001-adopted the dollarisation model to redeem their erstwhile bartered economies from further collapse.

By Bernard Mpofu/Wongai Zhangazha

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