HARARE – Zimbabwe’s President Emmerson Mnangagwa vowed on Friday not to revert to using the US dollar after a new local currency plunged against the greenback since its introduction this year, fuelling inflation and economic hardship.
The government ended a decade of dollarisation in June, partly to stem demand for the increasingly scarce currency, a decision economists estimate pushed inflation to 440%, eroding wages and savings.
Economists, businesses and the opposition have accused the government of rushing to reintroduce the Zimbabwe dollar without the backing of foreign currency reserves and say it 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 country, gripped by its worst economic crisis in a decade, and 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.
The Zimbabwe dollar has lost 61% of its value against the greenback since its re-introduction. Analysts expect it to weaken further as the government scrambles for US dollars to crank up imports of grain following a severe drought.
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 is on the verge of recession with millions facing hunger.
Mnangagwa said his government was pursuing difficult economic reforms, including measures to reduce the budget deficit to single digits.
He said violent fuel protests witnessed in January and calls by labor unions for strikes over pay were 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,” he said.