Zim’s retail sector urges caution on dedollarisation

The Confederation of Zimbabwe Retailers (CZR) has sounded a warning about the dangers of hastening de-dollarisation in a recent letter to the Reserve Bank of Zimbabwe (RBZ), citing potential risks to the economy.

While the RBZ faces pressure to restore full monetary sovereignty, the CZR’s message was clear that immediate dedollarisation could have “catastrophic consequences” for businesses and the broader economy.

One of the most critical concerns highlighted by the CZR is the risk to fuel imports.

Denford-Mutashu, Confederation of Zimbabwe Retailers president

“The fuel sector remains one of the most sensitive areas in the economy, with the pricing of fuel pegged to the US dollar,” the letter states.

With Zimbabwe heavily reliant on foreign currency for fuel procurement, a swift transition to local currency could cause fuel shortages, inflating prices and impacting transportation—an essential link in the retail supply chain.

Such disruptions would exacerbate inflationary pressures, destabilizing the fragile economy further, according to CZR.

Beyond fuel, the CZR warns that “full dedollarisation would exacerbate shortages” of essential goods and raw materials.

Zimbabwean industries, already grappling with foreign currency allocation issues, could find it even harder to import basic commodities. This could lead to panic buying, hoarding, and potential hyperinflation, reminiscent of the 2008 economic crisis.

The letter stresses that dedollarisation, if mishandled, risks reversing the hard-won gains in economic stability.

Accordingly, the financial sector faces significant threats.

“Many businesses have outstanding debts in US dollars,” CZR noted, arguing that converting these debts into local currency amid currency depreciation could lead to widespread insolvency.

This poses a systemic risk to both businesses and banks, with the potential for mass closures, layoffs, and eroded investor confidence.

To mitigate these risks, the CZR advocates for a phased approach.

“A strong and stable local currency is the cornerstone of any successful dedollarisation,” they argue.

The letter emphasizes the need for robust monetary and fiscal policies to stabilize the Zimbabwean dollar before any significant move toward dedollarisation.

While the desire for monetary sovereignty is understandable, Zimbabwe must avoid a hasty transition that could jeopardize the fragile economy.