Zimbabwe Must End ‘Dollar Grip’ to Regain Economic Sovereignty, Says Mangwana

Zimbabwe aims to reduce over 80% dollar transactions to regain economic sovereignty by 2030.

By Mackenzie Crow

7/11, 02:38 EDT
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Key Takeaway

  • Zimbabwe aims to reduce its reliance on the US dollar, which currently accounts for over 80% of transactions.
  • Information Secretary Nick Mangwana emphasizes de-dollarization as crucial for economic sovereignty, stability, and growth.
  • President Mnangagwa suggests the bullion-backed ZiG may become the sole legal tender before 2030.

Zimbabwe's Push for De-dollarization

Zimbabwe is making a concerted effort to reduce its reliance on the US dollar and bolster the use of its own currency. Information Secretary Nick Mangwana emphasized the urgency of this transition, stating, "The benefits of de-dollarization far outweigh the costs, making it an urgent imperative for Zimbabwe to break free from the US dollar grip." Currently, over 80% of Zimbabwe's transactions are conducted in dollars, a situation that arose after the nation lifted a ban on the US currency in March 2020 to mitigate a severe foreign exchange shortage during the pandemic.

Mangwana argues that reducing dependence on the greenback is crucial for regaining economic sovereignty, stability, and growth. Promoting the local currency and diversifying reserves are seen as key steps in this direction. President Emmerson Mnangagwa recently hinted that the country's bullion-backed ZiG, its sixth attempt in 15 years to establish a stable currency, might become the sole legal tender before 2030. This move is part of a broader strategy to stabilize the economy and reduce external vulnerabilities.

Mauritius' Currency Struggles

Mauritius is grappling with a significant depreciation of its rupee, despite a $50 million intervention by the central bank. The rupee fell to a record low of 48.605 against the dollar, indicating that the central bank's efforts were insufficient to meet market demand for the US currency. Economist Vinaye Ancharaz noted, "The rupee is depreciating at a faster pace than anticipated, reflecting an acute shortage of dollars and major foreign currencies on the market."

The island nation, a net importer of food, fuels, and equipment, is expected to see its trade deficit widen to nearly 200 billion rupees ($4.1 billion) this year. Companies earning foreign currencies are holding onto them, anticipating further weakening of the rupee. The central bank has urged these companies to supply the market with foreign currency to alleviate the shortage. Despite improved foreign-currency inflows from tourism and exports, confidence in the rupee remains low, exacerbating the currency's decline.

Russia's Shift to Yuan

Russia's foreign exchange market has seen a dramatic shift towards the yuan, with the currency now accounting for 99.6% of trading. This change follows sanctions that forced the Moscow Exchange to halt trading in US dollars and euros. In May, the yuan made up 53.6% of Russia's exchange trading volume, but the latest US sanctions in mid-June have significantly altered the landscape.

The average daily volume of exchange FX trading dropped by almost a third to 282 billion rubles in the second half of June, according to the Bank of Russia's financial risk review. While the US dollar and euro continue to be traded on the over-the-counter market, their turnover has slightly declined, and the yuan's share has increased. Major exporters' sales remained high, amounting to $14.6 billion last month, indicating a robust shift towards the yuan in response to geopolitical pressures.

Management Quotes

  • Nick Mangwana, Information Secretary of Zimbabwe:

    "The benefits of de-dollarization far outweigh the costs, making it an urgent imperative for Zimbabwe to break free from the US dollar grip."