Zimbabwe retailers rejects forced de-dollarisation

Zimbabwean retailers have issued a stark warning to the government regarding the potential consequences of de-dollarising the economy, cautioning that such a move could have catastrophic effects. This comes on the heels of the Reserve Bank of Zimbabwe (RBZ) devaluing the free-falling Zimbabwe Gold (ZiG) currency from 14 to 24.3 per United States dollar last Friday. The ZiG was introduced in April this year as part of the government's efforts to stabilize the economy.

Following the devaluation, some sectors have called for the elimination of the US dollar, advocating for the ZiG to become the sole currency of trade. However, in a report addressed to RBZ Governor John Mushayavanhu on September 30, Confederation of Zimbabwe Retailers (CZR) President Denford Mutashu expressed strong opposition to these suggestions. He stated that any attempts at forced de-dollarisation at this juncture could exacerbate the current economic turmoil rather than mitigate it.

"As the CZR, we strongly believe that any attempts to fully de-dollarise at this stage could have catastrophic consequences for both businesses and the broader economy," Mutashu remarked. "A hasty transition will amplify current economic challenges rather than alleviate them."

Mutashu outlined that de-dollarisation might lead to shortages of fuel and basic commodities, crippling the retail sector and other industries. "Switching the currency of transaction without adequate reserves and systems in place will inevitably lead to scarcity, causing significant disruptions across all sectors," he warned, noting that the transportation industry—integral to the retail supply chain—would also be adversely affected, driving up logistics costs and exacerbating inflationary pressures.

He pointed to existing challenges in the foreign currency exchange allocation system, highlighting that businesses already struggle to meet the demand for US dollars needed to import essential goods and raw materials. "Full de-dollarisation would exacerbate these shortages," he cautioned.

Mutashu advocated for a phased approach to de-dollarisation, supported by robust fiscal and monetary policies aimed at curbing inflation, stabilising the exchange rate, and building foreign currency reserves. He proposed allowing both the US dollar and the ZiG to coexist, offering businesses and consumers the flexibility to adapt. "Gradually, as confidence in the local currency builds, the reliance on the US dollar can be reduced," he suggested.

UK-based economist Chenayimoyo Mutambasere echoed these sentiments, stating that the government needs to build trust in the local currency. "There is a significant trust deficit and confidence crisis in the country, driven by political instability and inconsistent policies," he explained. "To address this, there is a need for political reforms or a shift towards new politics that restores confidence in government and its financial institutions."

Economist Prosper Chitambara emphasized the importance of a market-driven approach to de-dollarisation. "This must not necessarily be a rushed exercise or a government-decreed exercise, but rather an inclusive process based on market-determined benchmarks related to production, reserves, inflation, and informality," he said.

Vince Musewe, another economist, warned that Zimbabwe would continue to face economic challenges unless drastic changes in policymaking are implemented. "Zimbabweans prefer the US dollar, and that is not about to change. Unless there is a significant policy shift, the same problems will persist beyond 2030," he stated, adding that forcing a local currency could lead to economic collapse.

Zimbabwe has struggled with a currency crisis for years, with the ZiG being the country's sixth attempt to establish a stable currency in just 15 years. As the government navigates these complex economic waters, the voices of retailers and economists will be crucial in shaping the future of the country's monetary policy.