Economic commentators say the government should do more to support the Zimbabwe dollar to hold its value alongside the US dollar.
Policy measures introduced by fiscal and monetary authorities are to blame for the waning use of the local currency, several economic observers who spoke to Business Weekly have suggested.
Last week, the Zimbabwe Statistics Agency (ZIMSTAT) revealed that more and more economic agencies are now using the US dollar for transactions.
The Zimbabwe dollar has been losing value since it was reintroduced in 2019, and this year alone, it has lost 16 percent of its value on the official foreign currency auction system.
Trigrams analyst, Walter Mandeya, said the declining use of the Zimbabwe dollar is a result of several factors. He said:
[These factors] include a high level of informal cash trading, shortage of ZWL cash available through the banking system (due to unreasonably low limits), inversely the ready availability of USD cash, the high velocity with which the USD moves through the economy in comparison to the ZWL, pricing that discounts USD cash, to mention a few.
We believe that both currencies can co-exist, but the government has to actively encourage the use of the ZWL through incentives, rather than punitive measures.
There is a need for further innovation by both government and the private sector to bring greater confidence in the intermediation role of the formal financial system between these currencies.
Government will need to enact specific laws that add to the protections given to savers and formal intermediates around the use of this dual currency system for the ratios to skew back in favour of the local currency.
Economic analyst, Kudakwashe Mugova, said the decision to steeply increase interest rates and restrict stock market activities among others discouraged the use of the local currency.
He argued that using US dollar cash is now more attractive than the local currency which is associated with several tax and transaction charges.
Another analyst, Prosper Chitambara, said high levels of inflation forced economic agencies to prefer to transact in a more stable US dollar. He added:
We need to sustain the reform agenda that government has been implementing, enhance the efficiency of public spending, liberalisation of the foreign exchange market.
I think once we continue on that path, I think that should have a more significant effect on de-dollarising.
Another economist, Reneth Mano, urged both monetary and fiscal authorities to “embrace global best practice in managing macroeconomic stabilisation crisis.”