Redollarisation in full swing

LATEST figures released by the Zimbabwe National Statistics Agency (ZimStat) have shown that 83% of transactions on key food purchases at national level were done in United States dollars as the redollarisation juggernaut rolls on. “Data on currency of transaction for key food items such as maize meal, cooking oil, rice, beef and bread were also collected. At national level, about 83% of the transactions on key food purchases were in US dollars,” the ZimStat report read.

“The use of US dollars on key food purchases transactions was higher in rural areas (85,6%) than in urban areas (80,1%).”

The ZimStat data comes on the back of a sharp depreciation of the local currency, thereby eroding purchasing power.

The latest statistics are reflective of the situation on the ground, although independent experts say the figure could be higher given that the informal sector shuns the local currency.

Authorities insist that the dual currency is here to stay and has legislated for its continued use until 2030.

The government must make a firm decision on the currency to use. It is evident that the dual currency regime has failed. In fact, it has created entrepreneurs thriving on arbitrage opportunities.

It has created multiple exchange rates. For example, a dollar sells for ZWL$5 000 in cash at parallel market, ZWL$11 450,66 on the interbank market, ZWL$13 500 in supermarkets and over ZWL$15 000 on the parallel market.

Someone is benefiting along the way and the biggest loser is the citizen who pays for the fluctuations.

The government should take the lead in promoting the use of the local currency by charging all fees in Zimdollar. The payment of taxes and fees in Zimdollar will strengthen the use of the local currency.

Authorities, however, believe they have ticked most of the boxes and expect the local currency to stabilise against the greenback.

They say the depreciation of the local currency is psychological and does not follow economic fundamentals.

Experts say the government must address issues that erode confidence in the local currency.

“Price instability is a result of many issues including the political environment. When people do not have confidence in a system they seek value in the US dollar,” economist Vince Musewe told NewsDay last week.

“You cannot legislate or control people's psychological perceptions. You must implement stable policies and deal with all the issues that erode confidence which include corruption, patronage and political persecutions.”

The economy has been redollarising at a quicker pace, more than four years after the government revived the local currency. The Zimdollar was dumped in 2009 in favour of a multicurrency regime and was demonetised in 2016. It was resurrected in 2019 as the sole legal tender.

The dual currency regime, introduced in 2020, has failed as people opt for the US dollar. It has created pricing headaches due to multiple exchange rates existing in the economy.

Zimbabwe is paying the price for attempting to reverse dollarisation, which experts say is nearly irreversible.

Calls are growing louder again for the Zimdollar to go after it lost some of its functions such as medium of exchange and store of value.

The Zimdollar, a symbol of sovereignty, is retracing its steps to the grave, again.