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Zimbabwe warned of risks of abandoning the dollar
3 hrs ago |
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Zimbabwe will jeopardise the rare bout of economic stability the southern African nation is currently enjoying if it scraps the use of dollars domestically by 2030 as planned.
That's according to the country's largest independently-owned asset manager that cautioned the government not to "rock the boat" by following through on its intention to have the gold-backed ZiG currency replace the US unit, which now accounts for 85% of payments.
"A free and widespread use of the dollar within the economy," has made it easier for corporates and individuals to transact and plan, Imara Asset Management Chief Executive Officer Shelton Sibanda and colleague John Legat wrote in a client note.
Zimbabwe is experiencing one of its longest streaks of economic stability, boosted by a 31% surge in gold output, firmer platinum prices, a record tobacco crop and rising dollar remittances from Zimbabweans living outside the country. That's being reflected in stronger company results, a 45% rise in the dollar-based Victoria Falls stock exchange and a property boom.
It's also helping the ZiG, short for Zimbabwe Gold, which was launched in April 2024 and marked the sixth effort to establish a viable local currency after high inflation and collapsing foreign-exchange values scuppered previous attempts.
It has only weakened by 3% against the dollar this year amid tight monetary policy, a far cry from the collapses suffered by its predecessors.
Still, the Harare-based asset manager warned that "fragility remains" with the nation's unsustainable debt levels a threat. Fiscal pressures forced Zimbabwe's Treasury last month to order spending cuts to government ministries. It owes creditors $21 billion after defaulting in 1999 and efforts to seek a debt revamp have so far failed to yield fruit.
That's according to the country's largest independently-owned asset manager that cautioned the government not to "rock the boat" by following through on its intention to have the gold-backed ZiG currency replace the US unit, which now accounts for 85% of payments.
"A free and widespread use of the dollar within the economy," has made it easier for corporates and individuals to transact and plan, Imara Asset Management Chief Executive Officer Shelton Sibanda and colleague John Legat wrote in a client note.
Zimbabwe is experiencing one of its longest streaks of economic stability, boosted by a 31% surge in gold output, firmer platinum prices, a record tobacco crop and rising dollar remittances from Zimbabweans living outside the country. That's being reflected in stronger company results, a 45% rise in the dollar-based Victoria Falls stock exchange and a property boom.
It's also helping the ZiG, short for Zimbabwe Gold, which was launched in April 2024 and marked the sixth effort to establish a viable local currency after high inflation and collapsing foreign-exchange values scuppered previous attempts.
It has only weakened by 3% against the dollar this year amid tight monetary policy, a far cry from the collapses suffered by its predecessors.
Still, the Harare-based asset manager warned that "fragility remains" with the nation's unsustainable debt levels a threat. Fiscal pressures forced Zimbabwe's Treasury last month to order spending cuts to government ministries. It owes creditors $21 billion after defaulting in 1999 and efforts to seek a debt revamp have so far failed to yield fruit.
Source - Bloomberg
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