A leading economist, Gift Mugano, says Zimbabwe’s economy could dollarise by June this year due to the massive erosion of the value of the Zimbabwe dollar on the parallel market.
Mugano, the executive director at Africa Economic Development Strategies, said that local businesses have lost confidence in the local currency.
Addressing participants during an Employers Confederation of Zimbabwe symposium in Harare on Thursday, Mugano also projected that inflation would shoot to 100% by June this year. He said:
When you pay Chinese construction companies in RTGS (local currency), do you think they will take RTGS back to China?
They will go to Roadport (the parallel market) to buy United States dollars).
Mugano’s remarks come as Reserve Bank of Zimbabwe governor John Mangudya told the Confederation of Zimbabwe Industries that Zimbabwe would be using its currency as the main medium of exchange by 2027.
Currently, the official exchange rate is US$1:$120, while the parallel market rate is US$1:$235.
Mugano said the official and parallel market rates would rise further, driven by huge payments in Zimbabwe dollars which would then be used to buy foreign currency from the black market.
He forecasted the rate to rise in June when tobacco farmers buy United States dollars using the local currency they would have been paid by the Government.
Mugano urged businesses to find ways of dollarising their operations to remain afloat.
He said since President Emmerson Mnangagwa’s government was inaugurated, more than 600 statutory instruments had been issued, creating uncertainty on the market.