Recent utterances by Vice-President Constantino Chiwenga on February 19, 2022 at a ZANU-PF rally in Marondera that the country will not revert to the use of the United States of America $ has left tongues wagging as a section of the population were eagerly anticipating the return off the greenback to revitalise their buying power in the wake of ever rising inflation.
The Zimbabwean economy suffered a blow at the turn of the millennium mostly as a result of the Land-Reform programme which saw the ‘unlawful eviction’ of white farmers and with Zimbabwe being an agro- based economy, this caused instability economically triggering inflation to rise rapidly and rendering the Zimbabwean dollar unpractical to use as a means of exchange.
During the period of the Government of National Unity (GNU) stretching from 2009 to 2014, Zimbabwe officially dollarized, adopting the United States currency as the official legal tender and immediately arresting the soaring inflation thereby bringing sanity to the economy at the time.
This move saw the country stabilising financially and increased the livelihoods of most if not all Zimbabweans but however this meant the country had lost its monetary policy sovereignty and because people were earning in Zimbabwe and spending in the neighbouring countries like South Africa, industries back home seized to be profitable and eventually most of them closed business.
Currently, given almost similar conditions of rising inflation and the slow endorsement of the United States dollar by the monetary authorities, most people predict dejavu, anticipating the official return of the green-back to be the ‘Messiah’ in this economic quandary as teacher unions and various workers from both the public and private sectors continuously lobby for foreign currency salaries as a result piling pressure on government to dollarize.
In a stakeholders’ engagement meeting hosted by Zimbabwe Union of Journalists (ZUJ) in Masvingo at Chevron hotel on February 23, 2022, specialists from various professions echoed that the economy was headed towards dollarization.
Dr Regret Sunge, an economics lecturer at Great Zimbabwe University said re-dollarization seems imminent as the public seems to be swaying in that direction.
“Dollarization can occur either through instructive dollarization or market based strategy, with the latter being the imminent route in our case as we are seeing that prices are pegged according to the black-market rates.
“Also, we see a lot of workers’ unions lobbying for foreign currency salaries for their workers as recently evidenced by teacher unions and also as of December 2019, our national foreign currency deposits were beyond 103 percent. All these are pointers that the economy is warming up for dollarization,” said Dr Sunge.
Veteran journalist and ex-ZUJ president Mathew Takaona said partial dollarization is a corruption enhancer and politics is a big influencer in economics, hence as the country head towards 2023 harmonised polls, politicians might want to use dollarization as a campaign tool.
“Politics shape the economics of a country and as we are heading towards the 2023 general elections, the ruling party may use dollarization as a way to win votes and stay in power by introducing the green-back to cushion people’s livelihoods or else offer workers full-pay in foreign currency.
“If the economy is left as it is, in a partially dollarized environment, corruption will run havoc because those in power may misuse the Zimbabwean dollar by printing it in order to invest in the black market to syphon foreign currency or in the same way to finance their selfish interests and campaigns,” said Takaona.
However, Masvingo renowned entrepreneur Ignatious Mazambani said de-dollarizing was the way to go as this will boost local industries and goods at the same time having the country’s monetary policy sovereignty intact.
“As a businessman who has been operating in both pre and post dollarized eras, I can attest that de-dollarization is good for the economy because in the dollarized era we had over 90 percent of imported goods in our shops and that means local industries were disadvantaged and as a result they closed down while a lot of people lost jobs in the process raising the rate of unemployment.
“I am happy that as we speak, 60 percent of goods in our shops are locally made, thanks to de-dollarization. We really need the local currency for sovereignty and industrialization capacitation,” said Mazambani.
Dr Simon Matsvai an economics lecturer at GZU also said the huge appetite for imports prompted by possession of foreign currency culminated into issues like balance of payment deficit, while there was a growth in foreign currency inflows whose allocation however seemed to be misplaced by the authorities.
“We are having episodes by our monetary and the fiscal authorities trying to defend the existence of local currency. Dollarization as a process is also considered as a transitional one as something would have gone wrong then a nation adopt a multi-currency or dollarize so that is re-aligns its fundamentals for the temporary period normally 5-10 years after which we gradually revert to our own currency.
“Zimbabwe as a country quickly rushed to re-dollarize before re-aligning the fundamentals so that the economy can operate independently without those foreign currency back-ups. We were a bit reluctant as we enjoyed the multi-currency error’s benefits and forgot to look at production in our country,” said Dr Matsvai.
