Zimbabwe expects to completely wean its economy from continued use of the United States dollar in domestic trading in five years after the re-introduction of the local currency last year as the sole legal tender, the central bank said today.
For 10 years since 2009, Zimbabwe dollarised after adopting use of a basket of foreign currencies, dominated by the greenback, following the collapse of its inflation-ravaged local currency.
Other currencies making up the basket included the Botswana Pula, South African Rand, British Pound Sterling, the Euro, Japanese Yen and Chinese Yuan.
But last year, the Zimbabwe dollar returned as the sole currency in domestic trade, with government outlawing use of all other currencies.
But some sectors of the economy such as tourism have been granted authority to still charge for their goods and services in foreign currency, notably the US dollar.
And while in formal trade, the currency used is generally the local dollar, the situation is largely the opposite in the informal market.
Even some formal businesses are illegally demanding payment in foreign currency, though receipting in local currency.
Reserve Bank of Zimbabwe Governor, John Mangudya, said other countries that had gone through the same transition had taken up to 10 years to fully de-dollarise.
“The bank believes that the macro-economic signals that include fiscal and monetary discipline, prospects of positive economic growth and lower inflation are improving to support a gradual de-dollarisation process within a time-frame of five years,” Mangudya said, presenting the 2020 first half monetary policy statement.
“This is in line with other countries’ experiences on de-dollarisation.”
He said use of local currency for transacting purposes continued to go up, reaching a total amount of $459.6 billion from 189 million transactions for the full year of 2019.
“These measurements of the proportion of the use of 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 use of the local currency within the economy in order to support the de-dollarisation process.”
Last week, captains of industry said the economy was divided into two halves, with the local dollar in use in the formal market while US dollar use remained widespread in the informal sector. Zimbabwe’s economy is dominated by the latter.-New Ziana
Full monetary policy statement