The Confederation of Zimbabwe Retailers (CZR) has warned the government against banning the existing multi-currency system and designating the Zimbabwe Gold (ZiG) as the exclusive legal tender to stabilise the rapidly depreciating local currency, reported NewsDay.
On September 27, the Reserve Bank of Zimbabwe (RBZ) devalued the ZiG from 14.1 to 24.3 per United States dollar.
In the wake of this devaluation, some economic analysts have urged the government to ban the use of the United States dollar and adopt the ZiG as the exclusive currency for trade.
However, in a report addressed to RBZ governor John Mushayavanhu on September 30, CZR president Denford Mutashu warned that enforced de-dollarisation could have “catastrophic consequences” for the economy. Said Mutashu:
As the CZR, we strongly believe that any attempts to fully de-dollarise at this stage could have catastrophic consequences for both businesses and the broader economy.
A hasty transition will amplify current economic challenges rather than alleviate them.
Mutashu warned that banning the US dollar for domestic transactions could lead to fuel shortages and severely impact the retail sector, along with other industries. He said:
Any move to switch the currency of transaction, without adequate reserves and systems in place, will inevitably lead to scarcity, causing significant disruptions across all sectors.
The transportation industry, a critical player in the retail supply chain, would also be affected, driving up logistical costs and causing inflationary pressures.
With the current foreign currency exchange allocation system, there are already challenges in meeting the demands of industries for US dollars.
Full de-dollarisation would exacerbate these shortages as businesses will struggle to secure foreign currency to import essential goods and raw materials.
Mutashu suggested that, for now, the government should permit the coexistence of both the US dollar and the ZiG to provide businesses and consumers with the flexibility necessary to adapt. He added:
Gradually, as confidence in the local currency builds, the reliance on the US dollar can be reduced.
In an interview with NewsDay, Economist Prosper Chitambara said de-dollarisation should be market-driven. He said:
Well, my thinking is that the issue of de-dollarisation is a very sensitive matter and it is a matter that must be dealt with very circumspectly and also very cautiously.
It must not necessarily be a rushed exercise or a government-decreed exercise, but it must be an inclusive process that is based on a market-determined process that is tied to the attainment of certain key benchmarks around issues of production, issues of reserves, inflation and issues of informality.
Economist Vince Musewe warned that forcing a local currency will collapse the economy. He said:
Zimbabweans prefer the US dollar and that is not about to change. Unless there is a drastic change in policymaking, the same problems will continue to be faced by us beyond 2030. Forcing a local currency will collapse the economy.
The ZiG, or Zimbabwe Gold, was launched in April 2024 and represents the country’s sixth attempt to establish a stable currency in the past 15 years.
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