WOLRD BANK WARNS ZIM AGAINST USE OF ZIG
Zim wants to phase out US$ by 2030
By Godfrey Marawanyika
The World Bank has cautioned Zimbabwe against rushing to end the use of dollars in the economy as it could trigger capital flight.
Zimbabwe has set 2030 as the deadline to phase out the domestic use of dollars and make its bullion-backed ZiG its only currency.
“The government’s goal of transitioning to a mono-currency ZiG system carries a risk of premature de-dollarisation,” the World Bank said in a report Friday.
“Experience, including the nation’s own 2019 re-introduction of the Zimbabwean dollar, shows that forcing a shift before local currency credibility is established triggers capital flight, widens parallel market premiums, and reverses stabilisation gains.”
The Zimbabwean dollar was replaced by the ZiG in April 2024 after multiple crashes fanned inflation.
“The pace and sequencing of any transition will be as important as the destination,” the World Bank said.
The lender said Zimbabwe, which has been locked out of international debt markets since 1999 after a default, has an opportunity to restore access and improve external financing conditions as it engages with multilateral creditors on arrears clearance.
France and the UK recently agreed to co-chair a body that will help Zimbabwe restructure the billions of dollars it owes creditors.
“These changes represent a big shift in the macroeconomic environment and an opening for more ambitious reform.”
The World Bank expects the economy to expand 5% this year — the same as the government’s forecast — and slow down in 2027 due to El Niño, senior country economist Victor Steenbergen said in an interview.
Forecasters are predicting the current El Niño cycle will be the strongest on record, threatening severe drought in parts of southern Africa. #economy