Harare, Zimbabwe – Batsirai Mutara began to sell cheese and dairy products from a stand by fortune road at the age of 27. It was far from his old office work, where inflation devoured his pay check, which came to Zimbabweans dollars, faster than he could spend faster than he could spend his pay.
He wanted a stable income, so he ventured into informal trade, where he earned money in US dollars. His bet paid. This allowed him to draw on the coveted “back” economy which maintains many Zimbabweans afloat.
But the economy of Zimbabwe, which depends on the US dollar, is now faced with a sudden threat, because the executive decree of January 20 of US President Donald Trump to end any American foreign aid has sent shock waves in the country’s financial sector.
In Zimbabwe, banks are based strongly on foreign currencies for transactions, financing exchanges and reserves. Analysts provide that the decree will destabilize an already fragile banking system, leading to a liquidity crisis in which banks will find it difficult to respond to withdrawal requests. Without adequate access to foreign currencies, banks may have to considerably tighten their loan belts, which could strangle the economic activity even that they are supposed to support.
“This situation could lead to a more stringent loan and credit conditions, stifling economic activity,” said Kudzanai Sharara, an economic analyst. There will also be challenges in trade and debt service, which still complicates the economic difficulties of the country.
The member of the Reserve Bank Committee Persistence Gwanyanya said Zimbabwe had 800 million US dollars in development funds, the American agency for international development contributing more than $ 300 million per year.
The release of the situation, known as Gwanyanya, is to “connect all the government’s gaps and leaks caused by corruption, illicit activities and ineffectiveness”.
Since Zimbabwe’s independence in 1980, the United States has contributed more than $ 3.5 billion to improve food security, stimulate economic resilience, improve health and promote democratic governance. According to the Zimbabwe Bank Reserve Bank, around 10% of bank deposits, up to stopping American aid, come from international sources of aid.
Historically, Zimbabwe has relied on the US dollar as its main currency to stabilize its economy, in particular following the hyperinflation crisis of the late 2000s, which seriously undermined confidence in money local.
The country introduced the Zimbabwean dollar after independence in 1980, but the currency went into uselessness in the late 2000s, thanks to rampant money printing, controversial agrarian reforms and flight investors.
Hyperinflation was the most acute around 2008, the estimates suggesting that inflation rates have skyrocketed a percentage of billions. As the currency became practically worthless, the prices of basic goods affected billions, billions of billions and zimbabwean dollars.
In 2003, the government introduced the carrier’s checks. In 2009, he abandoned a local currency entirely in favor of the US dollar. Then, in 2019, he made his debut a reworked Zimbabwean dollar. In 2024, the government introduced ZIG, a sustained gold currency, but the currency was broken and lost value over time.
Today, traders like Mutara are counting on American dollars for daily transactions.
Many traders buy supplies in South Africa, which requires payment in US dollars. In addition, dollars are not affected by inflation and maintain their value, explains Mutara, who prefers to keep money in her pocket rather than in a local bank. “We just can’t,” he says, “count on the local currency.”
Now he may have no choice.
