‘Zim to dollarise by June’

Source: ‘Zim to dollarise by June’ – NewsDay Zimbabwe

BY KUDZAI KUWAZA
A TOP economist has warned that Zimbabwe’s economy could dollarise by June.

Gift Mugano, a leading economist and executive director at Africa Economic Development Strategies, spoke as Reserve Bank of Zimbabwe governor John Mangudya told the Confederation of Zimbabwe Industries that Zimbabwe would be using its currency as the main medium of exchange by 2027.

However, the economist said he was convinced that the Zimbabwe dollar would collapse due to a massive erosion of value on the black market by June.

His comments came as the disparity between the official and parallel market rates has widened.

The official exchange rate was this week pegged at US$1:$120, while the black market rate was at US$1:$235.

The exchange rate volatility has triggered skyrocketing prices of basic commodities.

It has also resulted in increased demand for payment of salaries in US dollars.

Addressing participants during an Employers Confederation of Zimbabwe symposium in Harare yesterday, Mugano projected that inflation would shoot to 100% by June this year.

At that point, Mugano said the official and parallel market rates would shoot further.

He said this would be driven by huge payments in Zimbabwe dollars, which would then be used to buy foreign currency on the black market.

“When you pay Chinese construction companies in RTGS (local currency), do you think they will take RTGS back to China? They will go to Roadport (the parallel market) to buy United States dollars),” he said.

Mugano said with foreign contractors and farmers already rushing to the parallel market, the rate would shoot up sharply in June when tobacco farmers join the queue to buy United States dollars, using the local currency component which they would have been paid by government.

“By June, we will be dollarised,” he projected.

He urged businesses to find ways of dollarising their operations to remain viable.

Mugano said money received from the International Monetary Fund through Special Drawing Rights in August 2021was being allocated to projects which were not urgent such as the US$144 million allocated to the Masvingo Road Interchange Development Project, popularly known as the Mbudzi roundabout.

He also queried the allocation of US$77 million towards the purchase of COVID-19 vaccines, particularly after government had already declared that it had bought sufficient vaccines to combat the pandemic.

Mugano said although the country received US$9,7 billion in foreign currency remittances, there was nothing to show for it in terms of the quality of  the lives of citizens.

He added that despite government boasting about a budget surplus, this was not reflected in the living conditions of the citizenry.

He said despite the positive growth rates projected by Treasury of up to 5,5% , “the evil and ugly head of poverty”continues to be prevalent.

Mugano said the major reason for the country’s failure to benefiting from foreign currency receipts was high levels of corruption that continued to deprive the majority of Zimbabweans decent livelihoods.

Mugano revealed that since President Emmerson Mnangagwa’s government came to power, more than 600 statutory instruments had been issued, creating uncertainty on the market.

He added that this was a major impediment to luring the much-needed investment into the country.