De facto Dollarization

Citizens and businesses’ response to Zimbabwe’s economic policies



By Dauglas Halimani

Great Zimbabwe University

Masvingo, Zimbabwe




The research sought to find the response of citizens to government’s economic policies by surveying households and businesses especially to currency policies. The researcher therefore conducted interviews with households and business owners to get to know their expenditure and income patterns given an unstable currency characterized by high inflation. The results of the research show that most businesses have adopted income and payment dollarization to cushion themselves against rampant inflation in the economy. While the government continue to be upbeat about the future and prices stabilizing it was noted that business and consumer confidence is low and citizens have begun the process of dollarizing the economy.


In 2009 Zimbabwe introduced the multi-currency system or dollarization where foreign currencies became the sole legal tender in place of the local currency. The country had suffered from hyperinflation which devastated the economy. The formation of the unity government brought much needed stability and hope for the poverty stricken citizens. However, the political arrangement was built on shaky grounds as the main political protagonists remained far apart in terms of issues that needed to be dealt with especially concerning political reforms. One of the reasons for the formation of the unity government was to then institute political reforms that would facilitate the holding of free and fair elections that would end the issue of disputed elections that has dogged the country since 2000. During its life from 2009 to 2013 no political reforms took place and in 2013 Zanu PF won elections defeating the Movement for Democratic Change then led by Morgan Tsvangirai amid allegations of vote rigging and vote buying. The use of the US dollar and other currencies had done much to bring stability and tame hyperinflation of 2008.

However, there were challenges of liquidity that continued to affect the economy   because government had lost its ability to print its own currency. The citizens and businesses that had suffered losses during the hyperinflation period welcomed the stability and discipline brought about by dollarization. The reckless printing of money to fund political programs and buying of foreign currency on the street by the apex bank was and is still blamed as one of the causes of rampant inflation that reached the peak in 2008 when the majority of businesses and individuals simply rejected the local currency and started pricing goods in foreign currencies.

In 2016 the Zanu PF led government introduced what it called bond notes which were at par with the US ddollar. At the time of their introduction the reasons cited for their introduction was the need for smaller denominations that would cater for issues of change in retail transactions. Eventually the bond notes became the main currency and in 2019 the Mnangagwa led government enacted laws that effectively outlawed the use of foreign currencies in local transactions. This came at a time when the bond notes were losing value in the parallel foreign exchange market and inflation was increasing with both business and citizens questioning the wisdom of the return of the local currency when memories are still fresh about the economic horrors of 2008. During the course of 2019 the Minister of Finance instructed the Zimbabwe Statistics Office not to publish annual inflation statistics arguing they promoted speculative behavior in foreign currency trading.

It was indeed an unprecedented move by the Minister not seen anywhere else. Already there had been an uproar on the official statistics which seemed to understate the true inflation rate as compared to the reality faced by businesses and consumers alike. A prominent American economist estimated the annual inflation rate to be above 500% in August. The government introduced new currency in the market to increase cash in circulation as traders were now a premium on other platforms not using cash for payment. The new currency also marked the official return of the Zimbabwe dollar ten years after its demonetization. Meanwhile the economy continues to be plagued by shortages of electricity, water, fuel, foreign currency and even the democratic space seems to have been shut. Many blame the Mnangagwa government for pursuing ruinous economic policies and lack of consultation.


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How to cite this paper: Halimani, D. (2020). De facto dollarization: citizens and businesses’ response to Zimbabwe’s economic policies; PM World Journal, Vol. IX, Issue I, January.  Available online at https://pmworldlibrary.net/wp-content/uploads/2020/01/pmwj89-Jan2020-Halimani-de-facto-dollarization-in-zimbabwe.pdf



About the Author


Dauglas Halimani

Great Zimbabwe University
Masvingo, Zimbabwe



Dauglas Halimani is 36 years old and a lecturer at Great Zimbabwe University since 2014. He holds a master’s degree in Banking and Financial Services from National University of Science and Technology as well as Bachelor of Commerce Honours in Finance from Great Zimbabwe University. He is a final year Bachelor of Laws student with the University of South Africa. His interests span the areas of commerce and law.  He can be contacted dhalimani@gzu.ac.zw