Dollarisation will shrink our economy, warns Delta

Zimbabwe dollarised in 2009, and has struggled to return to a stable local currency since (pic: Tsvangirayi Mukwazhi)

Delta Beverages says increased dollarisation in Zimbabwe’s economy may cripple economic growth this year. 

The country’s biggest brewer and bottler says its USD sales reached as high as 85% over the past year, averaging 67% in the 12 months to March. While this has its benefits, such as helping stabilise some costs, it may harm the economy overall, Delta says in its outlook on the economy for the year. 

“The increased dollarisation of the economy may result in reduced volatility of inflation and the exchange rate, however there is a risk that increased dollarisation may lead to economic contraction,” Delta says. 

The erosion of the Zimbabwe dollar has once again made the USD the preferred currency in the economy. Measures to support the Zimdollar, such as high interest rates and tight liquidity, have only accelerated USD usage. This week, government reacted to Zimdollar weakness by lifting import controls on basic goods, which some critics say may in fact drive up demand for USD further and hurt local producers. 

National data agency Zimstat said earlier this year that a survey of households showed USD usage at 76%. This is backed by many businesses, such as Delta, PPC and Dairibord, who report that the bulk of their sales is in USD. 

In its economic outlook, Delta says the election season brings both risks and opportunity. 

“The election season in Zimbabwe is upon us and will dominate an operating environment that is faced with numerous economic challenges. We anticipate a continuation of the current policy environment anchored by multicurrency trading system with increased dollarisation. The economy will benefit from the improved 2023 agricultural season, the increase in mining activities and the election spending.”