Chronicle Editor
Gibson Nyikadzino, Zimpapers Politics Hub
WHILE former United States president and Republican Party contender for the November elections, Donald Trump, was busy with his legal problems, his advisors were already planning ahead. Hopeful that he will return to the White House, they formulated policies to punish countries that want to de-dollarise.
The US dollar is the world’s reserve currency; the currency most countries keep to protect national wealth. These are called dollar-dominated assets. What it means is that by continuously using the American dollar, the US has unreasonable control over the world’s economy because it allows unfettered access to its capital market.
Most people trade and save using the US dollar. This currency has become a system where many nationalities and states depend on for financial stability. Even so, the world is now experimenting with de-dollarisation. If that experiment yields positive results, the US will begin to lose its influence and Trump is not a fan of that prospect.
“I would not allow countries to go off the dollar because when we lose that standard, that will be like losing a revolutionary war. That will be a hit to our country. It doesn’t get clearer than that,” Trump recently said.
Trump and his advisors want to make it possible for every country to remain dependent on the US dollar. Any country that crosses that line is likely to face penalties and consequences. However, no sovereign country should be made to rely on the US dollar against their will. Instead, countries should choose their own pathways without interference. Nations are in need of allies and not bullies.
Moving away from this over-reliance on the US currency is known as de-dollarisation. Several nations have been considering or attempting to do this, demonstrating defiance with minor but bold actions such as Argentina using the Chinese yuan to repay a loan and India using rupees to purchase oil from the United Arab Emirates (UAE). This has been necessitated by giant economic strides obtaining in the world.
Today, over 130 countries of the world are trading with China than with the US. In this trade, countries are agreeing to trade in their local currencies, as opposed to trading with the US dollar.
This alone tells a lot about how economic power is shifting. It has to be understood that economic power is more dangerous than political or military power. As a result, it is undeniable to state that because of these economic changes, the status of the US dollar as a world reserve currency is heading in the wrong direction.
Since World War II, the US dollar has been the world’s leading reserve currency. As of 2000, the dollar’s dominance stood at 71 percent. Today, it represents 58 percent of the value of foreign reserve holdings worldwide. By looking at this trend, the world is metamorphosing. The taproots of de-dollarisation are slowly firming. De-dollarisation is set to rewrite the rules of the global financial system and it is something that should be embraced.
Zimbabwe has already started walking the pathway to de-dollarisation by anchoring its currency unveiled in April, the Zimbabwe Gold (ZiG), on one of the world’s precious minerals, gold.
According to the World Gold Council (WGC), between 2019 and 2023, global gold production increased by at least 12 percent, with most coming from Africa. Reports and statistics indicate that Africa is home to the world’s greatest gold deposits, which however, are not being fully exploited.
Despite having the greatest gold deposits, in the 2024 top 10 list of gold producing countries, only South Africa makes it on the list. What is however, saddening is that the WGC reports in 2024 show that no African country has made it to the top 20 list of countries with the most gold reserves. Zimbabwe is regarded number nine top gold producer in Africa.
This is a problem that Africans need to address. Gold remains a priceless commodity that can increase a nation’s foreign exchange reserves, reduce reliance on foreign borrowing, draw-in international investment, and aid in currency stabilisation. While currency stabilisation is key, the adoption of gold is fundamental to ensure it is an anchor to the monetary policy of a state.
It could be Africa’s nightmare if it fails to translate the wealth it has and use it to anchor its currencies, primarily on the basis of mineral wealth, to create alternatives to the use of the US dollar as a reserve currency.
This is the anomaly Zimbabwe is working to correct through the introduction of the gold backed currency serving as an alternative to using the US dollar as a reserve currency. Besides acting as an alternative currency to reduce dependence on the US dollar, the ZiG is proof of how Zimbabwe’s significant mineral riches can stimulate stability and offer avenues for economic expansion.
With a stable currency, economy, increased production and gold deliveries, the ZiG can be internationalised at a transactional level. If fundamentals are aligned and the ZiG grows in its confidence through transactions generated, it becomes the alternative store of value. That is the most important barometer. Nations are also likely to do the same to push their currencies in the international sphere.
Gold deliveries should be increased and government should continue incentivising miners in order to plug holes of illicit financial flows for all minerals and metals.
For Zimbabwe, a country that has been under US sanctions for over two decades, the continued reliance on the US dollar does not give the country its sovereign existence. The ZiG is to be seen as the independent path to growth as an alternative to the US dollar, which is a weapon in economic wars.
In 1971, John Connally Jr, the US Treasury secretary in Richard Nixon’s administration said “the dollar is our currency, but your problem.” If in 1971 Connally Jr was confident to say “the dollar is our currency, but your problem,” more than 50 years later, there should be ways to avoid the US currency and its problems.
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