Kenneth Sharpe, a renowned property magnate, has urged Zimbabwe’s government to extend the use of the US dollar beyond 2025 to maintain economic stability. This sentiment comes even as Statutory Instrument 118A of 2022 permits the foreign currency’s usage only until the end of 2025.
The Zimbabwe National Statistics Agency recently revealed an interesting statistic: 80% of last month’s transactions were in US dollars.
Speaking at the Zimreal Property Investment Forum, Sharpe emphasized the importance of a stable currency for sustaining GDP growth. He stated, “The US dollar constitutes about 70-80% of our economy today.”
He went on to suggest that removing the US dollar could plunge the nation’s GDP back to the levels seen during the tenure of former President Robert Mugabe, a mere US$12 billion.
The increasing reliance on the dollar aligns with the diminishing value of the Zimbabwe dollar, which began its decline at the start of the year. This depreciation stems from the government’s rising expenses, supported by a bloated money supply.
As of June, the money supply had skyrocketed to ZWL$14,27 trillion, marking a whopping 500% increase from last year’s end.
On the international front, projections about Zimbabwe’s economy vary. The International Monetary Fund estimates it at US$30 billion, while the World Bank’s figure is US$21 billion.
Sharpe, also the CEO of WestProp, pointed out the economic disparities. Despite the dominance of foreign currency in transactions, Zimbabwe dollars still dominate in legal settlements.
Mashilo Pitjeng, CEO of TseboReal Asset Management, shifted the focus to GDP per capita, an indicator of the economic output per citizen. This metric has witnessed fluctuations in Zimbabwe, soaring from US$880 to US$2,100 a few years ago and then facing a decline.
Economists pinpoint the depreciation of local currency as a prime culprit. As a result, calls for the continuous adoption of the US dollar are becoming louder.
Businesses seeking stability often choose the US dollar for their fixed assets investments. Stephen Kapfunde of Old Mutual Property Zimbabwe Private Limited emphasizes the need for consistent policies, especially as the country heads towards the next general elections.
In a broader context, Zimbabwe has set an ambitious target. It aims to attain an upper middle-income status by 2030, as reported by Newsday Zimbabwe. The financial requirement for this goal stands at US$40 billion.
The government has been addressing this need by increasing the money supply, which is especially evident in the first half of this year.
To conclude, the debate surrounding the role of the US dollar in Zimbabwe’s economy is gaining momentum. The currency’s continued presence might be the key to unlocking the nation’s prosperous future.
