ZIMBABWEAN retailers have warned government against de-dollarising the economy to save the free-falling Zimbabwe Gold (ZiG) currency saying such a move would be catastrophic.
The Reserve Bank of Zimbabwe (RBZ) last Friday devalued the ZiG to 24,3 per United States dollar from 14.
The ZiG was introduced in April this year.
After the devaluation of the ZiG, some quarters have been calling on authorities to scrap the United States dollar and adopt the ZiG as the sole currency of trade.
In a report addressed to RBZ governor John Mushayavanhu dated September 30, Confederation of Zimbabwe Retailers (CZR) president Denford Mutashu said forced de-dollarisation might spark mayhem in the economy.
“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,” Mutashu said.
“A hasty transition will amplify current economic challenges rather than alleviate them.”
He said de-dollarisation might trigger shortages of fuel and basic commodities and cripple the retail sector as well as other industries.
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“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,” he said.
“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.”
He suggested a phased approach to de-dollarisation through robust fiscal and monetary policies including curbing inflation, stabilising the exchange rate and building foreign currency reserves and ensuring policy consistency.
“Allowing both the US dollar and the Zimdollar to coexist will give businesses and consumers the flexibility they need to adapt. Gradually, as confidence in the local currency builds, the reliance on the US dollar can be reduced,” Mutashu said.
In August, Cabinet approved a fresh de-dollarisation roadmap, with a monocurrency expected to come into force before 2030.
United Kingdom-based economist Chenayimoyo Mutambasere said government had to do more to build trust in the local currency.
“There is a significant trust deficit and confidence crisis in the country, driven by political instability and inconsistent policies,” Mutambasere said.
“To address this, there is a need for political reforms or a shift towards new politics that restores confidence in government and its financial institutions.
“People need to believe in the system for them to accept and use a local currency. Building trust through transparent governance, sound economic policies and political stability will be essential to ensure the success of any de-dollarisation efforts.”
Economist Prosper Chitambara said de-dollarisation should be market-driven.
“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,” he said.
“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 said the country would continue to face the same economic struggles unless a drastic change in policymaking was made.
“Zimbabweans prefer the US dollar and that is not about to change,” he said.
“Unless there is a drastic change in policymaking, the same problems will continue to face us beyond 2030. Forcing a local currency will collapse the economy.”
Zimbabwe has battled with a currency crisis for years. The ZiG is the country’s sixth attempt to introduce a stable currency in 15 years.
