The government of Zimbabwe has instituted a raft of stringent measures aimed at curbing the manipulation of its newly introduced Zimbabwean ZiG currency, as well as reining in the resurgence of parallel market exchange rates. These actions, announced following a cabinet meeting chaired by President Emmerson Mnangagwa, reflect an escalating effort to stabilise the nation’s currency and further the administration’s agenda to dedollarise the economy.
Since its introduction in April 2024, the ZiG currency—purportedly backed by foreign reserves and gold—has achieved a degree of pricing stability. However, recent months have witnessed a resurgence of parallel market exchange rates, which the government deems detrimental to its dedollarisation objectives. The latter objective remains crucial in a country where approximately 80% of all transactions are conducted in US dollars, signalling a deeply entrenched dollarisation of the economy.
In response to these challenges, the government has resolved to impose more severe penalties on entities found guilty of manipulating the ZiG currency, engaging in unjust price hikes, or participating in smuggling and other forms of unfair trade practices. Penalties for such offences will now range from a minimum of US$200 (ZAR3,665) to a maximum of US$5,000 or its ZiG equivalent, a significant increase designed to dissuade malfeasance.
Moreover, the government has mandated that all business operators establish bank accounts and install point-of-sale machines as part of enhanced licensing requirements. This move is intended to bolster transparency and curb the use of unofficial exchange rates, which have been increasingly utilised by some retailers and manufacturers, thereby undermining the currency’s stability.
The Reserve Bank of Zimbabwe will spearhead the implementation of these measures, deploying inspectors to monitor compliance and enforce penalties where necessary. Additionally, the government is undertaking steps to boost demand for the local currency by mandating that corporate income taxes be settled on a 50:50 basis in cases where a company’s foreign exchange revenue exceeds 50%. Furthermore, payments to government departments will now predominantly be made in the local currency, with exceptions for passports and other specified payments that may still be made in US dollars.
These initiatives form part of a broader framework that Finance Minister Mthuli Ncube is expected to elaborate upon in a forthcoming timeline for dedollarisation. The Mnangagwa administration has consistently promoted the ZiG currency as a cornerstone of its strategy to resolve Zimbabwe’s protracted hyperinflation woes, a strategy that has encountered scepticism from critics. They argue that public confidence in the local currency remains tenuous, a sentiment that could undermine the government’s efforts to transition from a multiple currency regime to one predominantly anchored by the ZiG.
While the introduction of the ZiG currency has so far anchored exchange rates and stabilised prices, with blended month-on-month inflation decelerating to -0.1% as of July 2024, the administration recognises the need for continued vigilance and stricter enforcement to sustain these gains. By enforcing these new measures, the government aims to mitigate the impact of parallel market activities and fortify the country’s path towards dedollarisation, even as it seeks to rebuild trust in the local currency.
