Opinion / Columnist
Zimbabwe cannot fund large-scale projects without monetary autonomy
6 hrs ago | Views
Zimbabwe's economic debate is often framed through the lens of inflation control, exchange rate stability, and the day-to-day functionality of the US dollar in domestic transactions.
Yet, beneath the surface of this apparent "fake stability" lies a far more profound macroeconomic pathology: a structurally incapacitated state, unable to finance or even imagine large-scale developmental projects. At the heart of this paralysis is the continued use of the US dollar- an externally anchored currency with no domestic lineage and no sovereign policy instruments behind it.
This opinion seeks to go beyond the superficial comforts of price stability under dollarisation and present a high-level analytical critique grounded in economics, banking, and investment theory. It argues, emphatically, that Zimbabwe will never be able to invest meaningfully in transformational national projects so long as it lacks control over its monetary system. Dollarisation may grant temporary stability, but it simultaneously removes the most vital tool of sovereign development finance: a national currency supported by an independent and competent central bank.
I. The Illusion of Stability under Dollarisation
The adoption of the US dollar, initially in 2009, was a defensive response to hyperinflation and monetary collapse. It provided an immediate sense of order and confidence to a traumatised economy. However, more than a decade later, dollarisation has hardened into a structural limitation, creating what could be described as "macro-stability without agency." Zimbabwe may avoid inflationary spirals when using the dollar, but it has forfeited its ability to pursue a long-term developmental strategy driven by public or semi-public capital formation.
What is often celebrated as stability is, in fact, stagnation. Dollarisation disarms Zimbabwe's monetary and fiscal sovereignty, leaving it incapable of deploying coordinated investment strategies. The real cost is not just in the lost flexibility, but in the inability to leverage endogenous financial resources through mechanisms such as quantitative easing, central bank-backed bond issuance, or investment banking intermediation.
II. Investment Banking and the Role of Monetary Sovereignty
High-capital infrastructure projects- railways, energy grids, industrial parks, smart cities- are not financed through savings alone. They are powered by long-term investment capital, typically channelled through investment banks operating in conjunction with a country's central bank and fiscal authorities. These institutions serve as capital wholesalers, aggregating large pools of funds from pension funds, sovereign wealth funds, and capital markets to finance projects with extended horizons and complex risk profiles.
In countries with sovereign currencies, investment banks enjoy access to central bank liquidity, government-backed guarantees, and legal tender instruments. This allows for the creation of a national investment ecosystem where high-risk, high-return projects can be incubated within a policy-controlled environment.
By contrast, in a dollarised Zimbabwe, such architecture is impossible. The Reserve Bank of Zimbabwe (RBZ) cannot issue dollars. It cannot set interest rates. It cannot act as lender of last resort. It cannot underwrite infrastructure bonds or guarantee foreign-denominated loans. In other words, it is a central bank in name only- sterilised by the very currency it relies on.
III. Historical Context: The Rhodesian Example
It is instructive to recall the role of institutions like RAL Merchant Bank during the Rhodesian era. Despite operating under sanctions, Rhodesia was able to channel domestic capital into agriculture, manufacturing, and infrastructure through a relatively developed investment banking system. These institutions worked in concert with a sovereign central bank and Treasury to mobilise domestic resources.
The contrast with contemporary Zimbabwe is stark. Despite being under no global sanctions comparable to those faced by Rhodesia, today's Zimbabwe is unable to finance even modest industrial policy initiatives. This is not because of an absence of ideas or ambition, but due to the disabling effect of a foreign monetary regime that prohibits the scaling of investment capital from within.
IV. The Core Systemic Risk: Absence of Monetary Sovereignty
The biggest systemic risk to any serious long-term investor in Zimbabwe is not political instability or regulatory opacity- it is monetary impotence. No matter how profitable a project might appear on paper, without a national currency and supporting capital markets, the probability of liquidity failure remains high. Foreign capital demands guarantees that Zimbabwe cannot credibly offer under dollarisation, while domestic capital remains shallow and disconnected from formal mobilisation structures.
Furthermore, dollarisation prevents the government from playing its historical role as a counter-cyclical investor. In times of economic downturn, a sovereign state should be able to stimulate the economy through monetary expansion, targeted spending, or credit support. In Zimbabwe, none of these options exist. Fiscal policy is constrained by tax revenue, and monetary policy is outsourced to the US Federal Reserve- whose priorities have nothing to do with Zimbabwe's growth trajectory.
V. The Developmental Trap
The result is a self-reinforcing developmental trap. Without investment, Zimbabwe cannot grow. Without growth, it cannot generate the fiscal surpluses to fund infrastructure. Without infrastructure, it cannot attract large-scale private capital. And without monetary sovereignty, it cannot break this cycle by itself.
The illusion that macroeconomic orthodoxy- defined narrowly by currency stability- will eventually attract foreign direct investment is misguided. No country in the global South has ever industrialised under dollarisation. Successful development models, from South Korea to China to Malaysia, have all been built on a platform of sovereign money, central bank activism, and domestic investment mobilisation.
VI. Conclusion: Reclaiming the Right to Develop
Zimbabwe's future lies not in tinkering with exchange rates or foreign investor appeasement, but in reclaiming the fundamental tools of statecraft. Chief among these is the capacity to finance its own development. That means restoring full monetary sovereignty through a credible national currency, modernising its central bank, and rebuilding domestic capital markets anchored by investment banking institutions.
Until this happens, dollarisation will continue to provide a fragile sense of calm, while the foundations of long-term prosperity remain out of reach. The choice is not between inflation and stability- it is between sovereignty and stagnation. Zimbabwe must choose sovereignty.
Author's Note: This analysis draws from classical and modern economic theories on monetary sovereignty, including the work of Hyman Minsky, Abba Lerner, and recent developments in Modern Monetary Theory (MMT), while incorporating African economic history and the institutional frameworks of investment banking.
Yet, beneath the surface of this apparent "fake stability" lies a far more profound macroeconomic pathology: a structurally incapacitated state, unable to finance or even imagine large-scale developmental projects. At the heart of this paralysis is the continued use of the US dollar- an externally anchored currency with no domestic lineage and no sovereign policy instruments behind it.
This opinion seeks to go beyond the superficial comforts of price stability under dollarisation and present a high-level analytical critique grounded in economics, banking, and investment theory. It argues, emphatically, that Zimbabwe will never be able to invest meaningfully in transformational national projects so long as it lacks control over its monetary system. Dollarisation may grant temporary stability, but it simultaneously removes the most vital tool of sovereign development finance: a national currency supported by an independent and competent central bank.
I. The Illusion of Stability under Dollarisation
The adoption of the US dollar, initially in 2009, was a defensive response to hyperinflation and monetary collapse. It provided an immediate sense of order and confidence to a traumatised economy. However, more than a decade later, dollarisation has hardened into a structural limitation, creating what could be described as "macro-stability without agency." Zimbabwe may avoid inflationary spirals when using the dollar, but it has forfeited its ability to pursue a long-term developmental strategy driven by public or semi-public capital formation.
What is often celebrated as stability is, in fact, stagnation. Dollarisation disarms Zimbabwe's monetary and fiscal sovereignty, leaving it incapable of deploying coordinated investment strategies. The real cost is not just in the lost flexibility, but in the inability to leverage endogenous financial resources through mechanisms such as quantitative easing, central bank-backed bond issuance, or investment banking intermediation.
II. Investment Banking and the Role of Monetary Sovereignty
High-capital infrastructure projects- railways, energy grids, industrial parks, smart cities- are not financed through savings alone. They are powered by long-term investment capital, typically channelled through investment banks operating in conjunction with a country's central bank and fiscal authorities. These institutions serve as capital wholesalers, aggregating large pools of funds from pension funds, sovereign wealth funds, and capital markets to finance projects with extended horizons and complex risk profiles.
In countries with sovereign currencies, investment banks enjoy access to central bank liquidity, government-backed guarantees, and legal tender instruments. This allows for the creation of a national investment ecosystem where high-risk, high-return projects can be incubated within a policy-controlled environment.
By contrast, in a dollarised Zimbabwe, such architecture is impossible. The Reserve Bank of Zimbabwe (RBZ) cannot issue dollars. It cannot set interest rates. It cannot act as lender of last resort. It cannot underwrite infrastructure bonds or guarantee foreign-denominated loans. In other words, it is a central bank in name only- sterilised by the very currency it relies on.
III. Historical Context: The Rhodesian Example
The contrast with contemporary Zimbabwe is stark. Despite being under no global sanctions comparable to those faced by Rhodesia, today's Zimbabwe is unable to finance even modest industrial policy initiatives. This is not because of an absence of ideas or ambition, but due to the disabling effect of a foreign monetary regime that prohibits the scaling of investment capital from within.
IV. The Core Systemic Risk: Absence of Monetary Sovereignty
The biggest systemic risk to any serious long-term investor in Zimbabwe is not political instability or regulatory opacity- it is monetary impotence. No matter how profitable a project might appear on paper, without a national currency and supporting capital markets, the probability of liquidity failure remains high. Foreign capital demands guarantees that Zimbabwe cannot credibly offer under dollarisation, while domestic capital remains shallow and disconnected from formal mobilisation structures.
Furthermore, dollarisation prevents the government from playing its historical role as a counter-cyclical investor. In times of economic downturn, a sovereign state should be able to stimulate the economy through monetary expansion, targeted spending, or credit support. In Zimbabwe, none of these options exist. Fiscal policy is constrained by tax revenue, and monetary policy is outsourced to the US Federal Reserve- whose priorities have nothing to do with Zimbabwe's growth trajectory.
V. The Developmental Trap
The result is a self-reinforcing developmental trap. Without investment, Zimbabwe cannot grow. Without growth, it cannot generate the fiscal surpluses to fund infrastructure. Without infrastructure, it cannot attract large-scale private capital. And without monetary sovereignty, it cannot break this cycle by itself.
The illusion that macroeconomic orthodoxy- defined narrowly by currency stability- will eventually attract foreign direct investment is misguided. No country in the global South has ever industrialised under dollarisation. Successful development models, from South Korea to China to Malaysia, have all been built on a platform of sovereign money, central bank activism, and domestic investment mobilisation.
VI. Conclusion: Reclaiming the Right to Develop
Zimbabwe's future lies not in tinkering with exchange rates or foreign investor appeasement, but in reclaiming the fundamental tools of statecraft. Chief among these is the capacity to finance its own development. That means restoring full monetary sovereignty through a credible national currency, modernising its central bank, and rebuilding domestic capital markets anchored by investment banking institutions.
Until this happens, dollarisation will continue to provide a fragile sense of calm, while the foundations of long-term prosperity remain out of reach. The choice is not between inflation and stability- it is between sovereignty and stagnation. Zimbabwe must choose sovereignty.
Author's Note: This analysis draws from classical and modern economic theories on monetary sovereignty, including the work of Hyman Minsky, Abba Lerner, and recent developments in Modern Monetary Theory (MMT), while incorporating African economic history and the institutional frameworks of investment banking.
Source - Brighton Musonza
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