Renowned economist and financial analyst Professor Gift Mugano has predicted that the Zimbabwean economy will collapse by August.
In an exclusive interview on the weekly series of Covid-19 Business lessons with the Buy Zimbabwe founder and Minex Chairman Munyaradzi Hwengwere, Prof Mugano said the government’s decision to pay civil servants a COVID-19 allowance in United States dollars will exert pressure on the private sector to pay forex-based salaries.
“The issue which is showing an ugly face is dollarisation and dollarisation is in two levers, the first lever is pricing in US dollars which began in March as l predicted last year.
“The second lever is the payment of salaries in US dollars which again began in March for the mining companies and for tobacco firms even way back than March.
“Government joined in June paying salaries in US dollars which is in my view observation by the government that the economy is finally dollarising,” he said.
He added that if the redollarisation transition is not managed well, it will result in a crash.
“The tragedy now is that we are getting into dollarisation when the cash flows of government and private sector are in Zim dollar so if that transition is not managed well, it will result in a crash and I see August as a critical month because we had already begun in June paying salaries. In July there is momentum, more prices in US dollars.
“Service delivery will be charged in US dollars, so some companies will fail to go through and that will become a very big problem, added prof Mugano.
He said dollarisation will definitely force the Zimdollar into extinction adding that the only sustainable solution to end the crisis is a political settlement.