Zimbabwe’s largest supermarket chain, OK Zimbabwe, has announced that it will only accept US dollars for some of its products, in a move that could signal the demise of the country’s local currency, the Zimdollar.
The retail giant stated to its customers, saying that all products marked with stars are priced in the green buck only. These include bottled water, cooking oil, sugar, and flour, among others.
The Zim dollar has been trading poorly against the major convertible currencies, with market experts urging the government to fully dollarize. One such voice is Professor Steve Hanke, who carries out currency analysis. He said that Zimbabwe has the highest inflation in the world and that the Zim dollar is a “zombie currency” that should be buried.
Zimbabwe adopted the US dollar as its official currency in 2009, after a period of hyperinflation that rendered the Zim dollar worthless. However, in 2019, the government reintroduced the Zimdollar as the sole legal tender, in a bid to curb the shortage of foreign currency and stimulate the economy.
The move backfired, as the Zim dollar rapidly lost value and confidence, leading to a rise in inflation and a fall in living standards. Many businesses and individuals resorted to using foreign currency, especially the US dollar, as a hedge against the Zimdollar’s volatility.
The government has been trying to stop the de-dollarisation of the economy, by imposing penalties and restrictions on the use of foreign currency. However, these measures have been largely ineffective, as the demand for hard currency remains high.
According to the latest statistics from the Zimbabwe National Statistics Agency (ZimStat), 78% of transactions for food purchases in 2023 were done in foreign currency. This shows that Zimbabwe’s economy is fast dollarising, despite the government’s efforts to reverse the trend.
The decision by OK Zimbabwe to demand US dollars for some of its products could have a ripple effect on other retailers and suppliers, who may follow suit to protect their margins and meet their foreign currency obligations.
This could further erode the Zimdollar’s value and acceptance, and push the country towards full dollarisation. Some analysts have argued that dollarisation is the only viable option for Zimbabwe, as it would restore stability and confidence in the economy.
However, others have warned that dollarisation would have negative consequences, such as loss of monetary sovereignty, reduced fiscal space, and increased vulnerability to external shocks. They have also pointed out that dollarisation is not a panacea for the country’s deep-rooted structural problems, such as corruption, poor governance, and low productivity.
The government has not yet commented on OK Zimbabwe’s announcement, but it is likely to face pressure from the public and the private sector to address the currency crisis and the economic challenges facing the country.
Zimbabweans are hoping for a lasting solution that will end their woes and improve their livelihoods. As one customer at OK Zimbabwe said, “We just want a stable currency that can buy us what we need. We don’t care if it’s Zimdollar or US dollar, as long as it works.”
Source: ZWNews
