Companies and individuals are now openly charging goods and services in hard currency after government outlawed the use of foreign currencies in local transactions and analysts say this signals a total loss of confidence in the new currency as the economy is once again self-dollarising.
A government decree in June outlawed the use of foreign currencies in local transaction and made the Zimbabwe dollar the sole legal tender.
Additional pieces of legislations enacted in September — SI 212 and SI 213 of 2019 — further imposed civil and criminal penalties on companies and individuals who either sell or quote their goods or services in foreign currency.
Of late, property owners have started quoting rentals in US dollars both in commercial and residential areas. Goods and services including food and accessories also have US dollar quotes.
Government itself has retained US dollar charges in areas like motor vehicle import duty, tourism and electricity tariffs for sectors such as mining.
Economists who spoke to the Zimbabwe independent said this was an indication that government itself had no confidence in the new currency and appreciates the value of the US dollar.
They however said that policymakers should accept that de-dollarisation is a process and does not happen overnight and cannot be foisted on an economy.
Economist Tony Hawkins once wrote that economies that are forced into dollarisation usually find it impossible to de-dollarise.
Zimbabwe’s mid-year efforts to ban the US dollar and latest developments lend credence to Hawkins’ assertions.The country is failing to embrace the new currency as it grapples with high inflation and erosion of individual disposable incomes.
Economist Persistence Gwanyanya told the Independent that government must accept reality and devise policies that boost confidence in the local currency.
“The country is self-re-dollarising because dollarisation itself is a process. You can’t achieve de-dollarisation in one day.
“People don’t have confidence in the local currency largely because it is characterised by depreciation and volatility. There should be some acceptance of reality by policymakers,” he said.
“You cannot cut the flow of the US dollar in the economy, it has to be market dictated. You cannot force de-dollarisation, rather you to nurture it and be patient with it. As long as it is forced, it will not work. Government should accept the reality of the matter and ignore it while concentrating on how to instil confidence in the local currency.”
Gwanyanya said enforcement was highly discouraged at this moment and the market should just be left to flow.Economist Gift Mugano said government was also charging in US dollars, adding the country got itself a new currency without the right fundamentals including sufficient foreign currency reserves.
Mugano said it was difficult for the country to de-dollarise when 70% of the economy is informalised.
“We are in a dollarised economy. People have no confidence in this new currency. They have lost their money twice already to these currency shifts.. It’s not possible to bring back that confidence easily that we need a production-oriented budget.
“There is no way we can no de-dollarise when we have 70% of the economy in informal sector. Who controls that sector? Again government itself is being multifaceted. They collect royalties and taxes as well some levies in the tourism sector in US dollars. Unless a miracle happens, the economy is self-redollarising and it’s going to be very difficult to have confidence in the local currency in the near future,” he said.
Finance Minister Mthuli Ncube last week admitted that it was becoming more difficult to de-dollarise, saying it was solely hinged on the stabilisation of the exchange rate.
To date, government has failed to stabilise the local currency which continues to weaken against the US dollar.
— Zimbabwe Independent