The dominance of the US dollar in Zimbabwe’s financial transactions has created challenges for monetary authorities in allocating limited capital against a huge demand from the industry.
Economic experts contend that externalisation of the US dollar, speculative and informal dealings, as well as the strength of the greenback against other currencies, has constrained ability by treasury and the central bank in balancing the act between spending and income inflows.
The introduction of a multiple currency system in 2009 brought hopes for macro-economic stability in Zimbabwe.
However with revelations by monetary authorities that the USs dollar is now accounting for 95 percent of transactions, the trend has created several challenges to the economy due to increased demand for the greenback against limited inflows.
“Rampant externalisation of the US dollar due to its strength against other currencies has resulted in the shortages of the monetary unit in Zimbabwe, forcing the central bank to institute corrective measures in the form of use of plastic money, withdrawal limits as well as export incentives paid through bond notes,” said Mr Persistence Gwanyanya, a financial analyst.
“With the US dollar continuing to firm and emerging as the main source of transactions in Zimbabwe, the trend has resulted in the economy becoming expensive in terms of production costs,” FBC Holdings Group CEO, Mr John Mushayavanhu said.
“With the US dollar becoming attractive to local and foreign investors, speculative deals have seen the world’s reserve currency being saved or stored within informal trading platforms, thereby creating challenges to the economy,” another economist, Mr Zack Murerwa said.
While treasury and monetary authorities are now focusing on increasing exports, boosting mining sector receipts, improving diaspora remittances and implementing ease of doing business reforms to improve hard cash inflows, the responsibility of stakeholders to complement such efforts is under the spotlight.