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Zimbabwe Central Bank Resists Full Dollarization

Despite having legalized the use of U.S. dollars and other hard currencies to purchase fuel amidst critical shortages, Reserve Bank of Zimbabwe Governor Gideon Gono has stated his opposition to full dollarization of the national economy.

The government-controlled Herald newspaper reported that Mr. Gono spelled this out to a group of traders from the country's Asian community, explaining that making the dollar legal tender for fuel purchases was an exceptional measure.

The Herald quoted Gono as saying that "to extend (the policy) to other products and services would be tantamount to dollarization of the economy."

But the central bank's decision to authorize certain outlets to sell gasoline or diesel for dollars or South African rand - also in wide circulation along with the pound sterling - made the dollar the currency of choice among fuel sellers and accelerated the depreciation of the Zimbabwean dollar against the U.S. dollar.

Even government agencies are reported to have been obliged to acquire fuel on the parallel market, and official flows have further weighed on the local currency.

Currently the U.S. dollar is trading on the street at around Z$75,000, three times the official rate of $26,000 set by the central bank in its weekly forex auctions. This has heightened expectation of yet another official devaluation of the currency.

Reporter Patience Rusere of VOA's Studio 7 for Zimbabwe spoke with analyst Dennis Mandudzo, a Zimbabwean now based in Stanford, California, who concludes that dollarization of the economy is already taking place and should be formalized.

More reports from VOA's Studio 7 for Zimbabwe...