Brains Muchemwa, a Harare-based economist and founder of Oxlink Capital, has said the Government never supported economy-wide use of the Zimbabwe dollar.
His remarks come amid the rapid market-led transition towards the exclusive use of the US dollar in transactions across Zimbabwe’s economy.
In an interview with Business Weekly, Brains Muchemwa said:
The Government is the issuer and guarantor of the Zimbabwe dollar but has unfortunately been showing a preference for the use of the US dollar over its currency. It started with Zimbabwe Revenue Authority (ZIMRA) charging duties in foreign currency to the recent gazetting of fines in US dollars.
Indeed, the whole pricing system is fixated with indexation to the US dollar and it all points to the Government that has, in all its actions, never supported the use and wide adoption of the local currency.
His remarks were supported by another economist, Professor Gift Mugano, who also said the government never supported the use of the Zimbabwe dollar. He said:
The fact I raised in October 2021, through a parliamentary portfolio committee (on budget and finance in Victoria Falls), I made this admission to the Minister of Finance (Mthuli Ncube), that the easiest way of creating demand for the Zimbabwe dollar is for Government to do all its transactions in the Zimbabwe dollar.
Government is the biggest consumer and spender in the economy. If the Government says trade in the currency of your choice, we do not care, but when you are paying tax (value added tax, corporate tax PAYE), I want my Zim dollar; when the government does that, it creates demand for the Zim dollar.
Businesses will not have the temptation to offload the Zimbabwe dollar, immediately, into the black market economy when they get it because they will know that (at some point) they will need to pay VAT, PAYE and where will they get the money when they need it.
Immediately you are creating demand before you even have production. You have already guaranteed that there is demand for it and people will keep it. That is what is lacking, and in that sense, the Government is failing because it is saying; you pay the tax in the currency of trade because we also want US dollars.
The tragedy becomes the fact that no one will respect the Zimbabwean dollar. They (economic agents) will say because we trade in US dollars; we will pay the Government in US dollars and we are killing our own currency by that measure.
The Zimbabwe dollar is unstable against major global currencies, a situation that has forced large parts of the economy to transact in the more stable foreign currency.
Most traders and service providers now price their goods and services in US dollars rather than Zimbabwe dollars.
In exceptional circumstances, traders accept payment in Zimbabwe dollars but raise the prices.
Nearly three-quarters of Zimbabwe’s economy is informal which means without bold measures to support the Zimbabwe dollar, the desirability of the local currency will keep waning.
A recent Zimbabwe Statistical Agency (ZIMSTAT) report indicated that approximately 76 per cent of expenditure in the economy was now in US dollars.