Opinion / Columnist
Why Zimbabwe should break free from the US dollar's grip
11 Jul 2024 at 09:10hrs | Views
Government Up Close
"Normalcy is that a country must have its own currency," President Mnangagwa is on record highlighting this fact.
Some people have argued that one of the gravest financial mistakes Zimbabwe made was to put in place a basket of currency as legal tender in January 2009.
To be fair, the circumstances then demanded such a move as the only viable option. Smarting from illegal sanctions which had totally undermined our currency, the use of the US dollar meant that our detractors would not attack their own currency like they did to ours.
But it has now been 15 years and it is high time we go back to having our own currency (the ZiG) as the sole legal tender of use in the Zimbabwean economy.
Zimbabwe introduced the Zimbabwe Gold also known as the ZiG on April 8, 2024. Since then, the country has experienced tremendous economic progress, which includes the stabilisation of the currency which was running riot.
The exchange rate from introduction to this day has always been around one US dollar to 13 ZiG and some change. Most of the time the ZiG has gained in value with very minuscule downswings once in a while.
Inflation has experienced a massive drop and the stability has brought about the necessary predictability which is key for planning.
The biggest fear in those who were sceptical about the efficacy of this policy move was whether the authorities had the correct discipline to only issue the currency with the backing of the precious minerals and foreign currency reserves as pronounced in the Monetary Policy Statement, or they would just print money in an unrestrained manner.
What has been witnessed so far is stringent discipline and conscientiousness by both the Monetary and Fiscal Authorities. So why should we wait for 2030 to go mono currency, when clearly the microcosm reflects the macrocosm?
After using the US dollar for 15 years, we are clear that currency substitution may work in the short-term, but it is not sustainable in the long-term, more so if it so happens to be one of the strongest currencies in the world whose issuer is wont to weaponising it.
The US dollar's dominance in global trade and finance has long been a double-edged sword. While it has facilitated international transactions and investments, it also poses significant risks to economies relying heavily on it and its use in Zimbabwe goes well beyond heavy reliance.
The recent surge in dollar strength has further highlighted the vulnerabilities of dollar-dependent countries like ours, making a compelling case for de-dollarisation.
In this op-ed, we will explore the reasons why Zimbabwe should reconsider its reliance on the US dollar and embrace the ZiG as its sole legal tender in the country.
The use of the US dollar as a reserve currency limits our ability to implement independent monetary policies.
When a country issues its own currency, there is normally a difference between the cost of producing the currency and its face value. This is called seignior age.
Adopting the US dollar as our primary legal tender in this country made us sacrifice the profits that proceed from our rights to issue our own currency.
But it is not all about seignior age, we are an independent country which is not in full control of our monetary policy in as far as the issuance of currency is involved.
We are dependent on the US Federal Reserve and their self-serving decisions which are never in our interest as a country. This is the same country which has imposed unilateral coercive measures against us and does not countenance any country that shows defiance even against its whimsical desires.
The Federal Reserve's decisions have far-reaching consequences, often conflicting with the economic interests of our country. By fully de-dollarising, we can regain control over our economic destiny and make decisions that benefit our own citizens.
With the current geopolitics and countries being fed up with US hegemony as well as the anticipated coming of the BRICS currency, Zimbabwe cannot afford to have its economy dependent on the performance of the US economy.
This is because the performance of the US economy has a direct impact on the economies of countries that are dollar-dependent.
A recession in the US can lead to a decline in our exports, investments and economic growth.
We need to reduce this exposure, and allow ourselves to chart our own economic course. Other countries like Saudi Arabia have decided to diversify their economies and reduce their dependency on the petrodollar through the non-dollar oil trades.
As the reader may recall, in 2020, Saudi Arabia started trading oil products with China in Yuan for the first time ever. It has since continuously taken steps to reduce its dependency on the petrodollar. This is the direction the world is taking and Zimbabwe, as a country, must not be caught napping.
Besides the issues of hegemony and geopolitical trends, the US dollar's value can fluctuate and this can adversely affect the competitiveness of our exports and the cost of our imports.
This volatility can lead to economic instability, making it challenging for businesses and individuals to make informed decisions. If we de-dollarise, we will reduce this uncertainty, creating therefore for ourselves a more stable economic environment.
Getting US dollar denominated loans and credit is a nightmare in Zimbabwe. Because the money that we have in this country either has to come from the proceeds of our exports, diaspora remittances receipts, Foreign Direct Investments or from tourism takings and so on.
We do not print the US dollar in this country.
We have to unshackle ourselves from this reliance on a currency that is backed by nothing, but propaganda and the ability of the issuer to compel economic participants to transact in dollars. Nothing else.
Sometimes it leaves one feeling hollow that the US can print useless pieces of paper which are nothing, but simply ink on paper.
They then take that paper to somewhere in Africa and get say usable lithium or platinum for that piece of paper. If we want to grow our economy, we have to wean our people from the notion that if it has to be called money, then it has to be the US dollar.
On June 25 2024, the Reserve Bank of Zimbabwe Governor, Dr John Mushayavanhu announced that the new currency code for the ZiG is now ZWG.
This was mainly for international transactions.
This enables one to change the ZiG for the rand, the pound sterling or any other international currency.
Now, if we were to de-dollarise, this would encourage the use of our national currency, promoting the ZiG's development and strengthening its value.
This, in turn, will enhance economic sovereignty and reduce our unsustainable reliance on foreign currencies, particularly the US dollar.
Some may feel they need to ask, "How?"
Well, some people consider goods and services in Zimbabwe more expensive than our contemporaries in the region and at the heart of it all is the use of the US dollar. Now, buying goods in ZiG is much more affordable than in US dollar.
This is because goods which are manufactured through labour paid for partially in the dollar, electricity paid with the dollar and other costs which were denominated in the dollar cannot compete against goods made through costs paid for through kwacha or kwanza.
There is a national consensus that we have had enough of the American Dollar and the ZiG should be our sole legal tender in Zimbabwe. But there are those who are not so sure.
Their fears cannot be completely dismissed without allayment.
People are worried about losing their savings, losing their purchasing power and of course what happened to pensions in 2008 still traumatises some. That is all understandable. But we have a President who has shown some great touch of economic prowess and discipline.
We are now poised to make the ZiG our sole legal tender because of that economic acumen. What happened in the past, was not under his stewardship.
It is not normal for a country not to have its own currency. We have that now, but surely we cannot have that being just 20 percent of our transactions. It is not normal. This is why His Excellency, President Mnangagwa said, "A currency is only printed by its owners and the only way to get foreign currency is through exports, Diaspora remittances and foreign investments, but as a country, we should have our own currency and we have embarked on that journey."
Mark Twain said that, "the secret to getting ahead is getting started".
The introduction of the ZiG is the start of our process of breaking free from the hold the dollar has on us and our people.
De-dollarisation is a necessary step towards economic sovereignty, stability, and growth. By reducing reliance on the US dollar, we can regain control over our economic destiny, promote our national currency, and diversify our reserves.
The benefits of de-dollarisation far outweigh the costs, making it an urgent imperative for Zimbabwe to break free from the US dollar's grip.
-----------
Nick Mangwana is the Permanent Secretary for Information, Publicity and Broadcasting Services
"Normalcy is that a country must have its own currency," President Mnangagwa is on record highlighting this fact.
Some people have argued that one of the gravest financial mistakes Zimbabwe made was to put in place a basket of currency as legal tender in January 2009.
To be fair, the circumstances then demanded such a move as the only viable option. Smarting from illegal sanctions which had totally undermined our currency, the use of the US dollar meant that our detractors would not attack their own currency like they did to ours.
But it has now been 15 years and it is high time we go back to having our own currency (the ZiG) as the sole legal tender of use in the Zimbabwean economy.
Zimbabwe introduced the Zimbabwe Gold also known as the ZiG on April 8, 2024. Since then, the country has experienced tremendous economic progress, which includes the stabilisation of the currency which was running riot.
The exchange rate from introduction to this day has always been around one US dollar to 13 ZiG and some change. Most of the time the ZiG has gained in value with very minuscule downswings once in a while.
Inflation has experienced a massive drop and the stability has brought about the necessary predictability which is key for planning.
The biggest fear in those who were sceptical about the efficacy of this policy move was whether the authorities had the correct discipline to only issue the currency with the backing of the precious minerals and foreign currency reserves as pronounced in the Monetary Policy Statement, or they would just print money in an unrestrained manner.
What has been witnessed so far is stringent discipline and conscientiousness by both the Monetary and Fiscal Authorities. So why should we wait for 2030 to go mono currency, when clearly the microcosm reflects the macrocosm?
After using the US dollar for 15 years, we are clear that currency substitution may work in the short-term, but it is not sustainable in the long-term, more so if it so happens to be one of the strongest currencies in the world whose issuer is wont to weaponising it.
The US dollar's dominance in global trade and finance has long been a double-edged sword. While it has facilitated international transactions and investments, it also poses significant risks to economies relying heavily on it and its use in Zimbabwe goes well beyond heavy reliance.
The recent surge in dollar strength has further highlighted the vulnerabilities of dollar-dependent countries like ours, making a compelling case for de-dollarisation.
In this op-ed, we will explore the reasons why Zimbabwe should reconsider its reliance on the US dollar and embrace the ZiG as its sole legal tender in the country.
The use of the US dollar as a reserve currency limits our ability to implement independent monetary policies.
When a country issues its own currency, there is normally a difference between the cost of producing the currency and its face value. This is called seignior age.
Adopting the US dollar as our primary legal tender in this country made us sacrifice the profits that proceed from our rights to issue our own currency.
But it is not all about seignior age, we are an independent country which is not in full control of our monetary policy in as far as the issuance of currency is involved.
We are dependent on the US Federal Reserve and their self-serving decisions which are never in our interest as a country. This is the same country which has imposed unilateral coercive measures against us and does not countenance any country that shows defiance even against its whimsical desires.
The Federal Reserve's decisions have far-reaching consequences, often conflicting with the economic interests of our country. By fully de-dollarising, we can regain control over our economic destiny and make decisions that benefit our own citizens.
With the current geopolitics and countries being fed up with US hegemony as well as the anticipated coming of the BRICS currency, Zimbabwe cannot afford to have its economy dependent on the performance of the US economy.
This is because the performance of the US economy has a direct impact on the economies of countries that are dollar-dependent.
A recession in the US can lead to a decline in our exports, investments and economic growth.
We need to reduce this exposure, and allow ourselves to chart our own economic course. Other countries like Saudi Arabia have decided to diversify their economies and reduce their dependency on the petrodollar through the non-dollar oil trades.
As the reader may recall, in 2020, Saudi Arabia started trading oil products with China in Yuan for the first time ever. It has since continuously taken steps to reduce its dependency on the petrodollar. This is the direction the world is taking and Zimbabwe, as a country, must not be caught napping.
This volatility can lead to economic instability, making it challenging for businesses and individuals to make informed decisions. If we de-dollarise, we will reduce this uncertainty, creating therefore for ourselves a more stable economic environment.
Getting US dollar denominated loans and credit is a nightmare in Zimbabwe. Because the money that we have in this country either has to come from the proceeds of our exports, diaspora remittances receipts, Foreign Direct Investments or from tourism takings and so on.
We do not print the US dollar in this country.
We have to unshackle ourselves from this reliance on a currency that is backed by nothing, but propaganda and the ability of the issuer to compel economic participants to transact in dollars. Nothing else.
Sometimes it leaves one feeling hollow that the US can print useless pieces of paper which are nothing, but simply ink on paper.
They then take that paper to somewhere in Africa and get say usable lithium or platinum for that piece of paper. If we want to grow our economy, we have to wean our people from the notion that if it has to be called money, then it has to be the US dollar.
On June 25 2024, the Reserve Bank of Zimbabwe Governor, Dr John Mushayavanhu announced that the new currency code for the ZiG is now ZWG.
This was mainly for international transactions.
This enables one to change the ZiG for the rand, the pound sterling or any other international currency.
Now, if we were to de-dollarise, this would encourage the use of our national currency, promoting the ZiG's development and strengthening its value.
This, in turn, will enhance economic sovereignty and reduce our unsustainable reliance on foreign currencies, particularly the US dollar.
Some may feel they need to ask, "How?"
Well, some people consider goods and services in Zimbabwe more expensive than our contemporaries in the region and at the heart of it all is the use of the US dollar. Now, buying goods in ZiG is much more affordable than in US dollar.
This is because goods which are manufactured through labour paid for partially in the dollar, electricity paid with the dollar and other costs which were denominated in the dollar cannot compete against goods made through costs paid for through kwacha or kwanza.
There is a national consensus that we have had enough of the American Dollar and the ZiG should be our sole legal tender in Zimbabwe. But there are those who are not so sure.
Their fears cannot be completely dismissed without allayment.
People are worried about losing their savings, losing their purchasing power and of course what happened to pensions in 2008 still traumatises some. That is all understandable. But we have a President who has shown some great touch of economic prowess and discipline.
We are now poised to make the ZiG our sole legal tender because of that economic acumen. What happened in the past, was not under his stewardship.
It is not normal for a country not to have its own currency. We have that now, but surely we cannot have that being just 20 percent of our transactions. It is not normal. This is why His Excellency, President Mnangagwa said, "A currency is only printed by its owners and the only way to get foreign currency is through exports, Diaspora remittances and foreign investments, but as a country, we should have our own currency and we have embarked on that journey."
Mark Twain said that, "the secret to getting ahead is getting started".
The introduction of the ZiG is the start of our process of breaking free from the hold the dollar has on us and our people.
De-dollarisation is a necessary step towards economic sovereignty, stability, and growth. By reducing reliance on the US dollar, we can regain control over our economic destiny, promote our national currency, and diversify our reserves.
The benefits of de-dollarisation far outweigh the costs, making it an urgent imperative for Zimbabwe to break free from the US dollar's grip.
-----------
Nick Mangwana is the Permanent Secretary for Information, Publicity and Broadcasting Services
Source - The Herald
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