US Dollars Dethrone Zimbabwe’s Currency for Second Time

Note to reader; I found it interesting that the gold shills and the Western dollar critics frequently refer to Zimbabwe’s inflation as a reason to ditch the dollar. The problem with all of the global currencies is that they are all inflating. Whether it’s the Russian ruble, Chinese Yuan, or the US dollar, the results are all the same and in fact, M2 growth in the United States has been relatively lower for years.

The renewed vigor in the alt-media to contend with the dollar’s flaws comes from gold’s recent rise above $2,000 an ounce. Unfortunately, gold has risen in all currencies, whether it’s the ruble, euro, or yuan. Perhaps this recent spat of premature dollar death analysis will fade until gold rises to $2,500 an ounce.

US Dollars Dethrone Zimbabwe’s Currency for Second Time

•Inflation, local currency weakness have boosted dollar use
•Greenbacks were utilized for 77% of transactions this year

(Bloomberg) — The greenback has replaced the Zimbabwean dollar as the most-used currency in the southern African nation for a second time, almost four years after the re-introduction of the local unit.

US dollars were utilized for 77% of transactions this year, surpassing the proportion that were conducted in the local currency for the first time since it was reissued in June 2019, data compiled by the statistics agency shows. The Zimbabwean dollar was abolished in 2009 and replaced mainly by the US dollar after an episode of hyperinflation rendered it worthless. It was reintroduced in an attempt to revive the stagnating economy.

Read more: Back to 2008 in Zimbabwe as Currency That Wrecked Lives Return

A government decision in June to officially reintroduce the greenback as legal tender to rein in surging inflation and stabilize the nation’s tumbling exchange rate has hastened the move away from the local currency. The Zimbabwean dollar has depreciated 91% against the US dollar in the last two years to trade at 944 at the official rate and about 1,600 on the parallel market.

In Demand

Businesses now charge in greenbacks for everything from food, fuel to medicines as they see the currency as a better store of value. Cement maker PPC Ltd.’s local unit said in its latest financial statement, that 79% of sales were in dollars.

The government’s revenue collection practices have contributed to the dollars’ resurgence, said Gift Mugano, an economics professor at the Durban University of Technology. “Passports are paid for in dollars, some taxes in foreign currency, fuel is in dollars and you can also pay toll gates in dollars,” he said.

Last month the statistics agency adopted blended inflation, which tracks prices in dollars and the local currency over one that assessed costs only in Zimbabwean dollar terms, as it better reflects the realities of the economy.

The new gauge indicates inflation has been less severe than the one measured in local-currency terms.

“The economy for all intents and purposes is largely dollarized,” said Prosper Chitambara, a Harare-based economist.

Read more: Zimbabwe Dollar’s Second Death Seen as Only a Matter of Time

The central bank’s monetary policy committee attributes the dominance of the greenback to “significant foreign currency inflows into the economy” in 2022. A trend “expected to continue” this year, Governor John Mangudya said in a statement last month.

The shift comes as China has made the internationalization of the yuan a top priority and countries including Russia, India and Saudi Arabia have sought to include non-dollar payments in their financial systems to reduce their dependence on the US. Last year’s sanctions on Russia and the sharpest tightening in monetary policy by the US Federal Reserve in decades, have brought a new sense of urgency among some nations to do so.

The surge in dollar usage has also led to increased demand from workers to be paid in greenbacks. Miners in March clinched a deal to receive the bulk of their pay in dollars, the first such wage agreement in five years.

Treasury also announced a salary hike for public servants last month that included an increase in Zimbabwean dollars and increments in greenbacks.

The current dollarization is accepted by authorities as it helps foster confidence in the economy, according to Persistence Gwanyanya, a member of the central bank’s MPC.

©2023 Bloomberg L.P.

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4 thoughts on “US Dollars Dethrone Zimbabwe’s Currency for Second Time

  1. Alex Jones Cash Moves ‘Self-Dealing,’ Bankruptcy Trustee Says

    https://news.bloomberglaw.com/bankruptcy-law/alex-jones-engaged-in-self-dealing-bankruptcy-report-finds

    Right-wing radio host Alex Jones helped remove profits from his bankrupt Infowars parent company via a separate business he partially controlled, a bankruptcy trustee has found.

    Additionally, about $54 million of purportedly secured debt Infowars parent Free Speech Systems LLC owes to Jones-affiliated PQPR Holdings Limited LLC isn’t legitimate and shouldn’t be first in line to be paid back under a bankruptcy plan, according to an initial report released Tuesday from Subchapter V trustee Melissa Haselden.

    By filing for bankruptcy, Jones and Free Speech Systems have temporarily protected themselves against paying the damages while they sort out their finances.

    The legitimacy of the debt by PQPR has been challenged by Connecticut families. They previously said Free Speech “concocted” the $54 million secured debt as a way to shift assets and obligations.

    Haselden noted that Jones drew about $62 million from his company over the course of 12 years. That sum included cash and payments to third parties on behalf of Jones that were classified as equity draws, the report said.

    PQPR, a wholesale distributor and former dietary supplement procurer for Free Speech, is partially owned by Jones through several limited liabilities companies, and managed by Jones’ father, according to court papers.

  2. Huge drops in the Fed’s balance sheet and bank credit last week…

    Level:
    last week: $8.706T
    This week: $8.632 T

    Total Assets – W/W:
    Last week: $-27.845 B
    This week: $-73.558 B

    Reserve Bank Credit – W/W
    Last week: $38.058 B
    This week: $-96.859 B

  3. When I was in Venezuela during the Chavez Communist regime, there was a huge blackmarket of trading in U.S. dollars there (dollar was embargoed at the time). Almost everyone I talked to there was involved, even if was just a hundred here, a hundred there. I am sure it’s still like that in the Soviet satellite. They had to keep adding zeros to the local “Bolivar”. You had to pay thousands of Bolivares for the smallest things.

    1. When I was going frequently to China I would have my expenses reimbursed in Yuan. I could sell them here to some Chinese nationals I knew who were willing to give me more than the exchanges and they got a better deal too. Nobody else wanted Yuan. I bet thats still mostly the case, useless currency outside of China. USD is hard to get inside China unless very well connected.

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