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Zimbabwe Faces De-Dollarization Challenge: Analysis

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HARARE, Zimbabwe – As Zimbabwe grapples with the challenge of de-dollarization, Information Secretary Nick Mangwana has emphasized the urgency of reducing the country’s reliance on the US dollar.

In a recent opinion piece published in the Herald newspaper, Mangwana outlined the strategic benefits of de-dollarization and the need for Zimbabwe to regain economic sovereignty and stability.

“The benefits of de-dollarization far outweigh the costs, making it an urgent imperative for Zimbabwe to break free from the US dollar grip,” Mangwana wrote. His comments highlight the government’s push to promote the use of the Zimbabwean dollar (ZWL) and reduce the overwhelming dominance of the US dollar in the economy.

According to government data, over 80% of transactions in Zimbabwe are currently denominated in US dollars. The ban on the use of foreign currency was lifted in March 2020 to mitigate an acute shortage of foreign exchange amid the coronavirus pandemic. This move, while necessary at the time, has prolonged Zimbabwe’s dependency on the greenback, stymying efforts to stabilize the local currency.

Mangwana argues that reducing this reliance is crucial for the country’s long-term economic health. “Reducing reliance on the greenback is an important step toward regaining economic sovereignty, stability, and growth,” he asserted. He further explained that promoting the local currency and diversifying reserves are essential steps toward achieving these goals.

Adding weight to Mangwana’s statements, President Emmerson Mnangagwa recently hinted at making the Zimbabwean Gold (ZiG) the sole legal tender before 2030. This bullion-backed currency, introduced as part of broader economic reforms, represents Zimbabwe’s sixth attempt in 15 years to establish a stable and functioning currency.

“We are committed to ensuring that the ZiG becomes the backbone of our monetary system, providing the necessary stability and confidence,” Mnangagwa said during a recent economic forum. His vision aligns with the broader strategic goal of de-dollarization and economic diversification.

Renowned economist and Zimbabwean financial analyst, Rufaro Hozheri, weighed in on the potential benefits and challenges of de-dollarization. “While the concept of de-dollarization is appealing and essential for long-term economic sovereignty, the transition must be managed carefully to avoid market disruptions and inflationary pressures,” Hozheri stated. He emphasized the need for robust monetary policies and public confidence in the local currency to ensure a smooth transition.

Another economic expert, John Robertson, shared similar sentiments. “De-dollarization is not just about switching currencies; it’s about building a resilient economic system that can withstand external shocks and internal mismanagement,” Robertson noted. He warned that without comprehensive economic reforms and strict fiscal discipline, de-dollarization efforts might fail to achieve the desired stability.

The journey towards de-dollarization will undoubtedly be challenging. However, Mangwana’s assertion that the benefits far outweigh the costs underscores the government’s determination to pursue this path. Key to this strategy will be fostering confidence in the Zimbabwean dollar and ensuring that the transition does not adversely affect the economy or the livelihoods of ordinary Zimbabweans.

Mangwana pointed out that the success of de-dollarization will hinge on several factors, including sound economic policies, transparency in government actions, and the ability to maintain stable inflation rates. “We need to build a strong and stable economy where the local currency is trusted and valued,” he emphasized.

Zimbabwe stands at a critical juncture as it seeks to reclaim its economic independence through de-dollarization. While the challenges are significant, the potential benefits of economic sovereignty, stability, and growth make this a necessary endeavor. With strategic planning, robust policies, and public support, Zimbabwe can navigate this complex transition and build a resilient economic future.