Dollar Does It Again — Dethrones This African Nation's Currency As Top Choice For Transactions

Led by inflation and local currency weakness, the U.S. dollar has reportedly replaced the Zimbabwean dollar as the most-used currency in the African country for a second time — about four years after the re-introduction of the local unit.

What Happened: U.S. dollars were utilized for 77% of transactions this year in Zimbabwe, reported Bloomberg, citing data compiled by the statistics agency.

Also Read: Best Penny Stocks

The Zimbabwean dollar was abolished in 2009 and replaced mainly by the U.S. dollar following hyperinflation. The currency was reintroduced in an attempt to resuscitate the stagnating economy, the report said.

The Zimbabwean dollar has declined 91% against the U.S. dollar over the last two years to trade at 944 at the official rate and about 1,600 on the parallel market, according to the report.

The shift away from the local currency was accentuated by a government decision in June to officially reintroduce the greenback as legal tender to tackle surging inflation and stabilize the country's falling exchange rate.

Expert Take: Gift Mugano, an economics professor at the Durban University of Technology, said the government's revenue collection practices have contributed to the dollars' resurgence.

"Passports are paid for in dollars, some taxes in foreign currency, fuel is in dollars and you can also pay toll gates in dollars," he said.

The central bank's monetary policy committee says the dominance of the U.S. dollar is because of "significant foreign currency inflows into the economy" in 2022.

The shift comes at a time when China sees internationalization of the yuan as a top priority. Nations including Russia, India and Saudi Arabia have sought to include non-dollar payments in their financial systems to lower dependence on the U.S., the report said.

Read Next: Dollar Smile Theory Inventor Says Greenback May Decline Another 10-15%