Online Reporter
Business Reporter
BUSINESS member organisations (BMOs) have appealed to the Government to create more incentives that encourage the adoption and use of Zimbabwe Gold (ZiG) in transactions by the public.
This initiative is believed to be crucial in fostering both the use and public confidence in the local currency.
The request follows Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube’s announcement during the 2025 National Budget presentation, where he stated the Government’s commitment to payment of most taxes and fees in ZiG as a strategy to enhance the use of the local currency.
Minister Ncube emphasised that a substantial proportion of taxpayer obligations would need to be settled in ZiG.
The introduction of ZiG in April 2024 saw some stability in the economy as the wider use of the local unit reduced reliance on the United States dollar (USD).
However, this stability was short-lived as the value of the new currency began to decline.
At the launch of ZiG in April last year, Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mushayavanhu said there would be demand for the local currency as corporates needed to settle their quarterly payment dates (QPDs) using the unit.
Despite these forecasts, a lack of supporting legislation led to a diminished demand for ZiG, resulting in a muted response during the second quarterly payment date, June 25, when companies were expected to settle 25 percent of their corporate tax obligations.
As the third quarterly payment date approached, the anticipated demand for ZiG did not materialise, which further highlighted the challenges facing the new currency.
The economic challenges worsened as inflation began to rise again, peaking in October 2024 at a staggering 37,2 percent, close to hyperinflation levels.
In response to the rapidly increasing inflation challenge, the RBZ made the decision to devalue ZiG on September 27, 2024, adjusting its value from ZiG13,99 per US dollar to ZiG24,39 per US dollar.
This devaluation was aimed at stabilising the economy and curbing inflation that threatened the viability of the newly established currency.
By December 2024, the inflation rate for ZiG had decreased to 3,7 percent, marking a significant decline of 33,6 percentage points from the October high.
Monetary adjustment contributed to narrowing of the premium in the parallel market, although by the end of December, the premium was still notably high, at approximately 40 percent.
This situation posed challenges mainly for compliant retail businesses, which were struggling to secure USD payments from customers; actually, there was an acute shortage of the local currency in the months of November and December 2024.
According to Confederation of Zimbabwe Retailers (CZR) president Mr Denford Mutashu, the Government must take decisive steps to restore public confidence in the local currency as the lack of it was a significant factor undermining broader economic recovery.
He said inflationary pressures and instability in exchange rates continue to diminish the purchasing power of the local currency, leading consumers and businesses to prefer foreign currencies, both in formal and informal markets.
This growing trend is significantly contributing to the dollarisation of the economy, further diminishing the role of the local currency as a reliable medium of exchange and store of value. “To address this issue, policy consistency is paramount. Stable and predictable monetary policies are essential for rebuilding trust in the local currency. The Government could incentivise the use of the local currency and other benefits for businesses that prioritise local currency transactions.
“These measures, combined with efforts to align fiscal and monetary policies, will go a long way towards restoring confidence in the Zimbabwe dollar,” said Mr Mutashu.
In a macro-economic briefing note to its members, the Confederation of Zimbabwe Industries (CZI) acknowledged the 2025 National Budget’s call for creating demand for ZiG; however, it expressed concern over the absence of specific implementation measures.
According to the CZI, controlling inflationary pressures on the new currency will remain a challenge if there are no compelling reasons for holders of the USD to exchange for ZiG.
“In the 2025 National Budget, ZiG inflation is expected to remain stable, with an average month-on-month inflation of below 3 percent. This is on the back of tight fiscal and monetary policies. This can only be achieved if Government creates demand for ZiG, as the tight liquidity conditions are not enough to sustain its value.
“The 2025 National Budget acknowledged that there is need to create demand for ZiG through having more tax heads payable in ZiG but no specific measures announced. Under such a scenario, it will be difficult to sustain ZiG inflationary pressures as the market will still have no compelling reasons for holders of USD to sell for ZiG. Thus, unless there are some measures to create demand for ZiG, the policy objective of containing ZiG month-on-month inflation below 3 percent might not be realisable,” said CZI.
In its 2025 Economic Outlook and Equity Strategy Report, local securities firm Morgan and Co said it anticipates monetary authorities to continue with policies that seek to maintain strict liquidity conditions in the economy.
According to the RBZ, the USD continues to dominate the multi-currency regime.
In 2024, the USD constituted 78,3 percent of local transactions in January; 81,2 percent in February; 80,5 percent in March; then 82,2 percent and 80,5 percent for April and May, respectively.
The use of the USD waned to 78,6 percent in June 2024; 76,4 percent in July; and 74,8 percent in August, as the use of and confidence in the newly introduced ZiG increased.
However, the resurgence of inflation and the ultimate currency devaluation re-established the USD dominance in local transactions to an average of 82,7 percent.
