Government's Policies Sabotaged Efforts To De-dollarise The Economy - Biti

Former Finance Minister Tendai Biti has criticised the Zimbabwean government’s forceful policies to adopt the volatile Zimdollar, stating that it has sabotaged efforts to de-dollarise the economy. Biti explained that the government’s approach has led to a lack of confidence in the local currency and created a significant gap between official and parallel forex rates.

Speaking at a post-budget breakfast meeting hosted by Zimbabwe Independent, and Mark & Associates last Friday, Biti said the government had created an environment of involuntary generalisation over the local currency. NewsDay quotes him as saying:

And what happens now in economics is that once you have a situation of involuntary generalisation, your currency will have been caught in flat land. It will have been caught naked. There will be an absolute lack of confidence, total lack of confidence, total collapse in your currency…there’s no country in the world that has involuntarily dollarised, that is able to de-dollarise again.

So, the government’s quest to de-dollarise is a losing battle. That’s why SI 33 of 2019 (Statutory Instrument 33 of 2019) collapsed and failed in Africa. The person who made it fail more than anyone else that was the centre of it and the government was the map.

He argued that the government’s own actions, such as continuing to charge levies and fees in US dollars despite the existence of the Zim dollar, have undermined de-dollarisation efforts. Zimbabwe is facing a serious shortage of foreign currency, as its credit line facilities are shrinking and revenue from exports has decreased. As a result, the government is charging levies and fees in US dollars. This is because the Zimbabwean dollar is not accepted as legal tender outside of Zimbabwe, so the government needs foreign currency to meet its financial obligations.

Biti highlighted that the government’s quest to de-dollarise is a losing battle and that there is no successful precedent for involuntary de-dollarisation. He cited the failure of Statutory Instrument 33 of 2019, which brought back the Zim dollar at a forced rate of 1:1 with the US dollar, as evidence of this.

Persistence Gwanyanya, a member of the central bank’s Monetary Policy Committee, acknowledged that once a country has experienced dollarisation, it is difficult to revert to using its own currency due to the stability and global acceptance of the US dollar.

The use of multiple currencies, including the US dollar, was adopted in Zimbabwe in 2009 after hyperinflation. However, the government’s enforcement of the Zimdollar and its policies surrounding it have hindered efforts to restore confidence in the local currency and de-dollarize the economy effectively.

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