Zimbabwe is making progress towards enforcing the use of
the Zimbabwe dollar as the sole legal tender, after 189 million transactions
valued at $459,6 billion were completed using local currency last year.
This was said by Reserve Bank of Zimbabwe (RBZ) Governor Dr
John Mangudya while presenting the 2020 Monetary Policy Statement yesterday.
He said the positive de-dollarisation taking place in the
economy was encouraging, with key macro-economic indicators improving to
support the move.
Dr Mangudya said complete de-dollarisation would be done
gradually over a five-year period, based on other countries’ experiences.
This comes after the Government last year abolished the US
dollar dominated multi-currency regime in use since February 2009 and
reintroduced the Zimdollar, which had been scrapped after its value was ravaged
by inflation.
While Government’s policy thrust is to switch the economy
to the Zimdollar, some sections of the economy continue to charge in US dollars
or alternatively index prices to the US dollar parallel market exchange rates,
with the informal sector in particular guilty of this practice.
Dr Mangudya presented the Monetary Policy Statement to bank
executives, economic analysts and the media, where he said de-dollarisation was
a process and not an event.
He said the programme was on track based on encouraging
economic signals of fiscal and monetary discipline, prospects for growth and
falling inflation, which were improving to support gradual de-dollarisation.
Dr Mangudya said the proportion of foreign currency
deposits to total money supply in the economy went down to 37 percent last
year, while foreign currency denominated loans stood at 22 percent of total
bank loans and advances in 2019, signalling the gradual shift towards
mono-currency.
“The measurements of the proportion of the use of the local
currency in the economy show that the country is on the right trajectory to
de-dollarisation,” he said.
“The bank shall, therefore, continue to provide incentives
to promote and defend the use of the local currency within the economy in order
to support the de-dollarisation process.”
Dr Mangudya’s assertion was supported by economist Mr Eddie
Cross, who said the country was on the right path to de-dollarisation given the
number and value of transactions that were completed in Zimdollars last year.
“In the last year, $459 billion was paid through the
electronic system, $459 billion; that must be about 80 percent or 90 percent of
all transactions,” he said.
“Cash transactions were about 3 to 4 percent of that and
the balance must have been US dollar transactions.
“What you can say is that 10 months after we de-dollarised,
we are already over 85 to 90 percent local currency usage; that is actually
quite dramatic. That is better than many countries that have gone through the
same process.”
Countries that have successfully de-dollarised, Mr Cross
said, include Israel, Bolivia and, partially, Argentina.
He said the public found transacting in US dollars to be
more convenient than using wads of local currency dollars, which are also in
short supply, while prices in US dollar terms appear reasonably low.
“People prefer to hold US dollars as a store of value,”
said Mr Cross.
“We are stabilising the Zimbabwe dollar in exchange rate
terms and we also stop inflation. I am told in January 2020 inflation was below
3 percent (monthly) and we were expecting 12 percent. We will be able to make
people prefer to use Zimdollar.”
The central bank is reportedly working on a programme to
deal with de-dollarisation of sections of the economy where players have
continued to charge for goods and services in United States dollars.
Confederation of Zimbabwe Industries (CZI) vice president
Joseph Gunda said given the flagrant disregard of the law by informal sector
players, Zimbabwe was making little additional progress in efforts to dump the
US dollar.
Mr Gunda said the situation on the ground painted a
completely different picture, especially with regards to the informal sector
where the US dollar continues to be the most preferred currency for
transacting.
“I think the progress towards de-dollarisation is
negligible, especially in the informal sector where you find that nearly
everybody is charging in US dollars,” he said. Herald
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