KEY POINTS
- Zimbabwe rejects full dollarisation despite currency challenges.
- Government says dollarisation would harm industrial progress.
- Retailers and citizens continue to prefer the US dollar over ZiG.
Zimbabwe’s government remains firm in its stance against full dollarisation, despite the Zimbabwe Gold (ZiG) currency losing value against the US dollar.
The Deputy Minister of Finance, David Mnangagwa, said reverting to the US dollar as the dominant currency would be the “worst” decision for the country’s future.
Full dollarisation would harm progress, Says Minister
Addressing Parliament, Mnangagwa argued that while dollarisation might seem like an easy fix to the economic challenges Zimbabwe is facing, it would reverse industrial gains.
He highlighted that the country would become overly dependent on imports and lose its competitive edge in industrialisation, which is critical for job creation.
“What will happen over time is that Zimbabwe will de-industrialise, and our progress will evaporate. Our children will lose out on jobs, and the nation will transform into a supermarket for other countries,” Mnangagwa warned.
He further added that the government aims for full de-dollarisation over time, a gradual process that will involve managing the competition between the ZiG and USD. The government also hopes to avoid being at the mercy of parallel market rates, which negatively affect consumers.
Competition between ZiG and USD creates market pressure
Despite the government’s efforts to position the ZiG as a solution to Zimbabwe’s economic problems, the currency has struggled in the market. Retailers continue to favor the US dollar, and Zimbabwe’s Reserve Bank recently devalued the ZiG by 43 percent. This has led to price instability and further challenges in the government’s bid for full de-dollarisation.
In response to queries from the opposition, Citizens Coalition for Change (CCC) member Agency Gumbo pointed out that 60 percent of goods on Zimbabwean shelves are imported, requiring foreign currency for purchase.
According to New Zimbabwe, Gumbo questioned why the government does not allow retailers to offer discounts on purchases made in USD to ease the strain on both retailers and consumers.
“Retailers need foreign currency to import goods, and since the government holds the largest reserves of foreign currency, allowing retailers to transact more in USD would make sense. Consumers could benefit from lower prices and retailers would have better access to the currency they need to operate,” Gumbo argued.
A delicate balance between de-dollarisation and economic stability
The Zimbabwean government introduced the ZiG as the country’s sixth currency in 2024, hoping it would stabilize the economy. However, its adoption has been slower than anticipated due to its devaluation and market preference for the US dollar.
Mnangagwa acknowledged that de-dollarisation would not be easy and would require structural reforms. He also warned that allowing the parallel market to dictate exchange rates would hurt consumers in the long run.
The government remains committed to managing this delicate balance to achieve its goal of full de-dollarisation.
