A Reflection on Sustainability of Dollarization in Zimbabwe

It is widely acknowledged that hyperinflation in Zimbabwe led to the abandonment of the local currency and the subsequent adoption of the multicurrency regime. Although literature has articulated on the benefits and disadvantages of dollarization in Zimbabwe, this paper rather tends to focus on the sustainability of dollarization. This is motivated by the notion that in the midst of evolving signs of the limitations of dollarization, research has tended to prescribe alternatives to dollarization seemingly discounting that its implementation came with huge costs which cannot be easily overlooked. For this reason, this paper advocates that policymakers need to explicitly embrace dollarization and avoid abrupt abandonment of the monetary regime as previously done with the Zimbabwean dollar. Therefore the purpose of this paper is to provide an insight into the factors that need to be considered for the sustainability of dollarization since its adoption was aimed at economic recovery and stabilization. The method employed here entails the use of an evaluative research approach and the findings show that there are some factors that enable sustainability of dollarization that are not out of reach but rather require a comprehensive systematic framework of macroeconomic reform adjusted for a dollarized economy.