Zimbabwe’s President Emmerson Mnangagwa vowed on Friday not to revert to using the United States dollar despite the country’s new local currency plunging against the greenback since its introduction this year, fuelling inflation and economic hardship.
In 2009, Zimbabwe “dollarised” the economy by allowing the US dollar and other foreign currencies to be used as legal tender in the country after hyperinflation decimated the value of Zimbabwe’s sovereign currency.
The government ended dollarisation in June after it outlawed the use of foreign currencies in local transactions in a bid to defend a fledgling interim sovereign currency. This paved the way for the new Zimbabwean dollar, which formally entered circulation last month.
But economists say the decision to end dollarisation actually drove hyperinflation, eroding wages and savings.
Economists, businesses and the opposition have accused the government of rushing to reintroduce the Zimbabwean dollar without the backing of foreign currency reserves. They say the government should allow the use of US dollar and other currencies to tame soaring prices.
“No progressive nation can progress without its own currency. However, we have so many among our people who fight this decision. We will not revert back to a basket of currencies, never, never, never,” Mnangagwa told ZANU-PF members at an annual party conference outside the capital.
There is little foreign investment in the troubled Southern African nation, which is in the throes of its worst economic crisis in a decade. Export earnings and remittances from the diaspora have fallen. The resulting shortage of US dollars to pay for imports has led to fuel and electricity shortages, hobbling businesses including in the important mining sector.
Although it is now illegal to use foreign currency to buy local goods, many people still take the risk and some businesses charge in both US and Zimbabwe dollars.
Hopes have faded that Mnangagwa – who took over from late President Robert Mugabe after a coup two years ago – can quickly revive the economy, which has left millions struggling and facing hunger.
Mnangagwa said his government is pursuing difficult economic reforms, including measures to reduce the budget deficit to single digits.
He said violent protests in January that erupted in the wake of a fuel price hike – and calls by labour unions for strikes to boost paychecks in line with inflation – were both part of an anti-government plot to derail economic reforms and undermine his rule.
“I want to commend the people of Zimbabwe for rejecting the machinations by those with unbridled political ambitions who are even prepared to use violence, divisions and disunity and violent demonstrations to acquire power,” Mnangagwa said.