Government’s implementation of the de-dollarisation policy to safeguard its monetary sovereignty is a failed policy as the market has rejected the local currency in favour of the greenback, multiple economists and captains of industry have said.
The push for the greenback has seen several companies coming up with dollarised packages.
Zimbabwe’s largest mobile telecommunications operator, Econet Wireless is the latest firm to offer its customers US$ packages to raise foreign currency to fund its operations in a highly capitalised forex demanding sector.
The analysts said the government has lost the de-dollarisation war.
“All indicators are pointing that we can’t use the Zimbabwe dollar anymore as the official currency. The denial by our government is normal in any economy as ideally every country in the world would want to use its own currency,” economist Gift Mugano told Business Times this week.
He added: “What government is doing is like a person refusing to die as everyone wants to live but the reality will always catch up with you.
“I told you last time that the government is spending a lot of money on construction thereby pumping more money into the market. If you look closely 34.2% of the total national budget is going towards construction [what going towards construction [what are you doing?], that money is going to buy foreign currency and the parallel exchange rate will continue to run away.
“The only way to address that in a preservation point of view as a nation, households and companies is to dollarise.”
“The authorities themselves have dollarised their salary payments and there is a clear explanation on their Covid-19 cushioning allowance. You don’t have to accept dollarisation or deny it but it happens naturally.”
University of Zimbabwe economics lecturer Moses Chundu told this publication that the de-dollarisation plan is a failed policy.
“The insistence on an unworkable de-dollarisation roadmap when everything else in the market is pointing in the opposite direction is not helping with building of the much-needed confidence to turn around the fortunes of this economy,” Chundu said.
“The burden of the futile journey to full de-dollarisation is being unfairly borne by the poor and wage earners including civil servants who have no means to hedge themselves against the side effects of the policy. They’re being left alone to defend a local currency whose creators and sponsors don’t seem to believe in it.”
Companies that are accepting the Zimbabwe dollar are pegging their prices using the parallel market rate.
“Businesses are using between ZWL$330 to ZWL$350 per US$1 in pricing of goods yet the actual operating rate is below that at around ZWL$250. The businesses doing this are doing it in broad daylight daring the monetary authorities whose threats in trying to enforce the relevant instruments have proved futile,” Chundu said.
He said the sooner the authorities accept this reality the better to save the poor and Zimbabwe dollar wage earners.
Chundu said the argument that there is not enough US$ stock in the market to sustain full dollarisation is not based on evidence.
“People are already dollarised and authorities better accept that reality,” Chundu said.
The Confederation of Zimbabwe Industries president Kurai Matsheza said the government wanted to go full throttle on the de-dollarisation roadmap but the market seems to be seeing the other way as some companies are coming up with US$ packages.
“As business we think this is taking us back to dollarisation,” Matsheza said.
“We are urging the government to be decisive on dollarising. For now, we have failed to meet fundamentals of dedollarisation hence redollarising seems to be the way out.
“We may return to the local currency when the fundamentals are right,” Matsheza said.
He said in the informal market sector economy, most trades are happening in US$.
A government source said the economy is using the local currency for pride rather than the zeal to use it.
“With the anti-sanction crusade that we are strongly embarking on in the past few years, total dumping of our local currency would show lack of seriousness in denouncing Western-imposed embargoes as we will be using their currency, therefore we will stand with the ZWL$ to make a point to them,” she said.
Central bank governor John Mangudya says the economy will not dollarise despite calls by various firms to do so in the face of the weakening local currency.
Mangudya has insisted on a de-dollarisation roadmap and said the authorities will not yield to firms’ dollarisation demands.
“I have said it and I will continue saying it that we are not dollarising because it is bad for our economy and our industry. Economy will go into deflation, it will not grow and the industry capacity utilisation will not go up where it is right because the economy will be contracting.
“This will make our exports or economy less competitive,” Mangudya said.
He added: “I don’t know what you mean by dollarisation or dollarisation because as we speak, we are using a dual currency system but in the next three to five years we will have returned to the local currency.
“One thing the Zimbabweans have to understand is that de-dollarisation is a process not an overnight event.”