Why Zimbabwe presented its 2024 budget in Zimdollars when 80% of transactions are in US dollars

Zimbabwe presented its 2024 budget in Zimbabwe dollars, though more than 80% of the transactions in the country are in United States dollars, because people must accept that the Zimbabwe dollar is the country’s domestic currency, Finance Minister Mthuli Ncube said.

He was responding to contributions in the Senate during the debate for next’s budget. Chief Ngungubane asked why the minister had presented the budget in the local currency when the US dollar dominated the market and some institutions did not accept the local currency.

“I gave the budget in Zimbabwean dollars and perhaps he was wondering why set it in Zimbabwean dollars.  I should be giving a United States dollar equivalent.  That we can do.  There is no problem but then we must accept that the Zimbabwean dollar is our domestic currency.  So that is our starting point.  We can always give the United States dollar equivalent,” Ncube said.

“He made a very important point that we should insist that certain services be paid for in domestic currency.  I agree with him.  That is why we have tried to say corporate tax, for example 50% of it should be paid in Zimbabwean dollars and we will keep expanding the type of services that ought to be paid in domestic currency.”

The Finance minister also said he was bothered by the issue of exchange rate stability.

“The issue that still bothers me, the Senate and everybody, is the issue of the exchange rate instability. That is our ultimate challenge that we need to deal with and it is linked to the past, the hyperinflation, the past that we have lived through. The fact that we did not for 10 years have a domestic currency, we had a US dollar and now we have ours and some feel that it is not good enough, those are the facts. 

“The fact that we have not been able to access credit lines easily for balance of payments support, once you have a hard currency as part of your domestic currency, it is even harder to build foreign reserves because your US dollar is domestic currency, it is not even foreign currency.  So how do you build foreign currency reserves when the currency that you ought to be using for building reserves is domestic currency?  

“So, you can see how complex this issue is.  I must say that we have a few strategies and plans going forward for dealing with this issue of the currency and the exchange rate.  I cannot say more because whenever we say something about exchange rate in currency, it is just having fun, so I will stop here for now.   We are happy to receive any input, ideas and any suggestions from Members of this Senate and the public for us to move forward on the issue of the currency.”

The Zimbabwe dollar kicked off the year at $05.4164 and ended at $5 903.3898 a drop of more than 700%.

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