Zimbabwe’s dollar dilemma: Joining BRICS bank sparks de-dollarization fears

by Victor Adetimilehin

Zimbabwe has applied to join the BRICS New Development Bank (NDB), a multilateral institution set up by Brazil, Russia, India, China and South Africa to finance infrastructure projects in emerging and developing countries. The move has sparked a debate about the implications of de-dollarization, the process of reducing the use of the US dollar as a global reserve currency.

Zimbabwe has been using the US dollar as its main medium of exchange since 2009, when it abandoned its own currency after a period of hyperinflation that rendered it worthless. The country briefly banned the use of foreign currencies in 2019, but reversed the decision in 2020 to rein in inflation. According to the central bank governor John Mangudya, the US dollar accounts for 75% of all transactions in Zimbabwe.

However, some analysts and politicians have argued that Zimbabwe should move away from the dollar and adopt a more diversified and sovereign monetary system. They cite the example of the BRICS countries, which have been pursuing a de-dollarization agenda in response to the perceived weaponization of the dollar by the US against its rivals, especially Russia.

One of the proponents of de-dollarization is Tendai Biti, a former finance minister and opposition leader. He wrote on X that joining the BRICS bank would be a “zany attempt” to follow the global de-dollarization trend, which he said would be a “disaster” for Zimbabwean workers and pensioners. He said Zimbabwe did not have the economic conditions to ditch the dollar, such as macroeconomic stability, fiscal discipline and monetary sovereignty.

On the other hand, some experts and officials have welcomed Zimbabwe’s bid to join the BRICS bank as a way of expanding its sources of capital and reducing its dependence on Western-dominated institutions such as the International Monetary Fund (IMF) and the World Bank. They say that Zimbabwe could benefit from the NDB’s lending in local currencies, which would reduce exchange rate risks and enhance financial inclusion.

The NDB has not yet decided on Zimbabwe’s application, which requires the approval of all five founding members. The bank is also working on developing criteria for admitting new members, which are expected to be announced at a summit of foreign ministers of BRICS countries next month.

Zimbabwe’s quest to join the BRICS bank reflects its desire to diversify its economic partners and pursue its own development path. However, it also faces challenges such as high debt, low growth and political instability. Whether joining the BRICS bank will help or hinder Zimbabwe’s economic recovery remains to be seen.

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