Zimbabwe has joined Southern and Eastern African economies in looking at the possibilities of embracing the Chinese renmimbi (RMB) as part of reserve currency management by central banks in the region.
This emerged at a 2018 MEFMI Forum for East and Southern Africa Finance Ministry Permanent Secretaries and Central Bank Deputy Governors in Harare.
China is emerging as the largest trading partner for Africa, with the region also having loans and grants from the Asian economy.
Reserve Bank of Zimbabwe Governor, Dr John Mangudya, who was represented by his deputy, Dr Khukupile Mlambo told participants that embracing the RMB will safeguard regional financial stability.
“The reserve currency management is critical if we want to enhance management of currencies, so we should focus on how we can unlock more trade values in the future,” said Dr Mlambo.
Crown Agents Investments Management Deputy Chief Executive Officer, Mr Ritesh Anand said the rise of the RMB in the special drawing rights (SDR) basket of currencies should enable economies to repay multilateral debts using the Asian nation’s currency.
“We are at pains to explain the challenges we face on most occasions as a result of failure to pay debts, so why can we not take such a route,” he said.
MEFMI Executive Director, Dr Caleb Fundanga said regional economies should identify financial benefits from new currency reserve management systems.
“What more can we expect at a time when we are reeling under huge debts and failure to increase the portfolio of investments to boost economic development?” he asked rhetorically.
Findings at the forum show that huge currency reserves for African economies are invested in US dollars yet China and India are dominating global trade and investment portfolios.