Strong dollar weighs heavily on Zimbabwe’s competitiveness, business leaders warn

STAFF WRITER

Zimbabwe’s leading business groups and economists have raised concerns that the dominance of the US dollar is severely undermining the country’s economic competitiveness.

According to the Confederation of Zimbabwe Industries (CZI) 2024 Manufacturing Sector Survey, high production costs—driven largely by dollarisation—are crippling the country’s ability to compete under the African Continental Free Trade Area (AfCFTA). While tight monetary policies aimed at promoting the new ZiG currency are expected to gradually ease dependence on the greenback, analysts warn the transition will be difficult.

Economist Patience Sandra Makunike stressed that the US dollar, as a hard currency, inflates local production costs, placing Zimbabwe at a disadvantage compared to regional peers like Zambia and South Africa. She called for “internal devaluation” strategies to reduce costs and restore competitiveness.

The situation is evident in Zimbabwe’s shrinking current account surplus, which plunged from US$1 billion in 2018–2020 to just US$100 million, coinciding with the wider adoption of the US dollar.

Persistence Gwanyanya, an economist and member of the RBZ Monetary Policy Committee, noted that the central bank’s tight monetary stance should incentivise banks to offload US dollar reserves in favour of ZiG lending, boosting local currency circulation.

Meanwhile, Zimbabwe National Chamber of Commerce CEO Christopher  Mugaga emphasised the urgent need to rebuild confidence in the domestic currency through sound monetary management and regulatory reforms.

Beyond currency challenges, the CZI flagged outdated technology, high taxes, and erratic electricity supply as major barriers to industrial competitiveness. Recent recommendations from the National Competitiveness Commission summit urged streamlined regulations and the adoption of Regulatory Impact Assessments (RIA) to create a more business-friendly environment and stimulate sustainable economic growth.