- A former Zimbabwean finance minister warned of an economic “catastrophe” if the country turns away from the dollar.
- Zimbabwe has applied to join the BRICS bank, where there is a heated debate over dedollarization.
- During a summit in August Heads of state and government of the BRICS countries made contradictory and different statements on dedollarization.
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Zimbabwe wants to join a bank founded by the BRICS emerging economies – but a de-dollarization debate has already begun before the country’s application was approved.
Tendai Biti, a former Zimbabwean finance minister, has warned of an economic “catastrophe” if the current government of President Emmerson Mnangagwa decides to abandon the dollar. Zimbabwe recently applied to join the new BRICS development bank.
Any move away from the greenback is a “crazy attempt to follow the global de-dollarization agenda pursued by BRICS and other proponents of a new world order,” Biti said in an X post on Thursday, referring to the bloc of Brazil, Russia and India, China and South Africa.
“This move will be an absolute disaster and cost workers and pensioners,” he added.
He also said Zimbabwe does not have the economic capacity to abandon the dollar.
Biti’s comments add to an intense ongoing debate over dedollarization. The discourse has been fueled by fears that Washington is using the dollar-denominated global financial system as a weapon against Russia over the Ukraine war.
The discussion was so intense that the possible creation of a common BRICS currency was even discussed at a summit in August.
The meeting ended with no announcements on a common currency and over the course of the summit, BRICS leaders even made contradictory and different statements on dedollarization.
The BRICS bank is also starting its de-dollarization journey by increasing lending in local member currencies.
Biti’s views on dedollarization also reflect local Zimbabweans’ concerns about their economy.
Zimbabwe has been in an economic crisis for years; inflation was 101.3% in July compared to the previous year.
Due to economic uncertainties and hyperinflation, the U.S. dollar is used in 75% of all transactions in Zimbabwe, even though Zimbabwe’s official currency is the Zimbabwe dollar, central bank governor John Mangudya told Bloomberg in July.
Zimbabwe’s government banned the use of foreign currencies as legal tender in 2019. President Mnangagwa said at the time that the country’s economy was “at the mercy of US dollar pricing, which has been a major cause of inflation,” according to the BBC.
However, the country had to lift the ban in June 2022 to curb inflation.
As de-dollarization continues to be talked about in emerging markets, including Zimbabwe, locals are concerned that it could spill over into their lives.
“The US dollar gave us our lives back. We can’t do without him,” Lovemore Mutenha, a liquor store owner in Zimbabwe, told the Associated Press in August. “How can a budget be made with the Zimbabwe dollar, whose value is constantly changing? It’s not stable and we’ve had a crash before.”
Representatives from Zimbabwe’s central bank Biti and the BRICS New Development Bank did not immediately respond to Insider’s requests for comment.
Source : markets.businessinsider.com