Following the downgrading of the debt of the US last week by the Standard & Poor (S&P) rating agency, Zimbabwean officials have been calling for a rethink on the use of the dollar.
S&P dropped the US’s rating to AA+ from the top rating, AAA, based on a lack of confidence that Congress and President Barack Obama will resolve their stalemate on how to address America’s worsening debt situation. Zimbabwean officials say this will have an effect on the US dollar which will in turn negatively impact the country’s economy. Killer Zivhu, president of the Zimbabwe Cross Border Association, said if the Yaun was adopted it will come as a big relief to members of his association who buy most of their merchandise from China. “We would rather officially adopt the Yuan or South African rand. The dollar is exposing us to unfair business practices,” Zivhu said.
Last September, Vice President Joice Mujuru said Zimbabwe should consider adopting the Chinese Yuan, in line with the country’s policy of using multiple currencies to tackle hyperinflation. Mujuru said adopting the Yuan would be a "natural progression and offshoot of the Look East policy,”
China has already called for a new global reserve currency to avert a catastrophe caused by any single country. China is the U.S. government’s largest single creditor, with over $1 trillion locked in treasury bonds as well as more than a trillion in other dollar-denominated assets.
But Tony Hawkins, a professor of economics at the graduate School of Management at the University of Zimbabwe said “there is no obvious alternative to the US dollar.” “There is no such thing as a stable currency in the markets,” Hawkins said. “At present the Euro, British Pound and Chinese Yuan are also shaky.
“Unfortunately for Zimbabwe we are caught up in the financial mess and we have to live with it”.