Source: Biti Criticizes Mthuli Ncube Over Falling Zimbabwe Dollar
Former Finance Minister Tendai Biti criticized Treasury boss Mthuli Ncube over the falling Zimbabwe dollar. Biti said there is widespread rejection of the local currency in the market and an urgent need to address the failed de-dollarization experiment. He wrote on Twitter:
There is rampant rejection of the local currency in the market. Local manufacturers are openly rejecting the RTGS [real-time gross settlement], proving once more that an economy will never be run by statutory instruments. There is an urgent need to address the failed de-dollarisation experiment. What a disaster.
Zimbabwe has remained trapped by multiple crises — economic, political and social. The decay of infrastructure and the collapse of public services, the mismanagement of the exchange rate, the closure of political space, point to the fact that this lot is the worst regime in the history of governments.
Despite government efforts, including the introduction of gold coins, the local currency is unstable and trading at over 200% premium on the parallel market. Some businesses have abandoned the local currency and only accept US dollars, despite threats from the government.
Economists blame the Zimbabwe dollar’s continuous decline on the shortage of US dollars, which is causing the local currency to lose value.
The declining currency can have significant negative impacts on the country’s economy, including:
1). Inflation: A weakening currency can lead to higher inflation as the cost of imported goods and services rise, which can reduce people’s purchasing power and increase the cost of living.
2). Reduced investment: Investors may be less willing to invest in a country with a weak currency, which can limit economic growth and job creation.
3). Reduced government revenue: The government’s revenue is often collected in local currency, so a weakened currency can reduce the government’s ability to fund public services and infrastructure projects.
4). Increased debt: A weaker currency can make it more difficult for the government to service its debt, which can lead to defaults and other financial problems.
5). Reduced international trade: A weaker currency can make it more expensive for local businesses to import goods and services, which can reduce international trade and limit economic activity.