The U.S dollar has once again taken the place of Zimbabwe’s currency as the most commonly used currency in the country, four years after the local currency was reintroduced.
77% of transactions in Zimbabwe 🇿🇼 have used U.S dollars in 2023 so far.https://t.co/4BwEBVO6ab pic.twitter.com/hF2vPRxCte
— BitKE (@BitcoinKE) April 30, 2023
According to data collected by the statistics agency, the use of US dollars in transactions in Zimbabwe has exceeded the use of the re-issued local currency for the first time since June 2019, accounting for 77% of transactions in 2023 so far.
After hyperinflation left the Zimbabwean dollar worthless, it was abolished in 2009 and mainly replaced with the US dollar. In 2019, it was reintroduced in a bid to revive the sluggish economy. But the government re-introduced the US dollar in June 2022 as legal tender to combat soaring inflation and stabilize the country’s plummeting exchange rate, a move which has accelerated the shift away from the local currency.
In March 2023, BitKE reported that the Confederation of Zimbabwe Industries (CZI), a major trade organization in Zimbabwe, warned that the increased usage of the currency may slow GDP growth and make the country’s exports less competitive. This came as the Zimbabwe National Statistics Agency estimates that around 76% of government spending is in U.S dollars, which is an indicator that Zimbabwe is moving towards full dollarisation.
“Passports are paid for in dollars, some taxes in foreign currency, fuel is in dollars and you can also pay toll gates in dollars,” Gift Mugano, an economics professor at the Durban University of Technology told Bloomberg.
As the usage of U.S dollars has surged in Zimbabwe, it has resulted in a rise in demand from workers to be paid in the greenback. This trend has been observed in the mining sector where workers managed to secure a wage agreement in March 2023 to receive most of their pay in dollars, marking the first of such a deal in five years.
Over the past two years, the Zimbabwean dollar has lost 91% of its value against the US dollar, with an official exchange rate of 944 and a parallel market rate of around 1,600, according to the report by Bloomberg. In the report, businesses in Zimbabwe now accept the U.S dollar as payment for various goods and services, including food, fuel, and medicine as they consider it a more stable currency.
The central bank’s monetary policy committee explains that the U.S dollar’s dominance is due to the ‘significant foreign currency inflows into the economy’ in 2022, which is expected to continue this year.
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