Opinion Piece: Ensuring the Success of the Gold-Backed ZiG Currency in Zimbabwe
The recent introduction of the gold-backed ZiG currency by the Reserve Bank of Zimbabwe (RBZ) represents a pivotal moment in the nation’s economic history. However, as we have witnessed with the ill-fated bond notes and previous versions of different currency series, the success of a new currency is not guaranteed. It requires a well-coordinated fiscal and monetary policy framework. In light of this, the call to action by Prof. Gift Mugano for the Minister of Finance, Economic Development, and Investment Promotions, Professor Mthuli Ncube, is both timely and critical. Here is what the government must do to ensure the success of the ZiG currency so that it does not meet the same fate as the bond notes, the RTGS dollar and the recently demonitized Zimbabwe Dollar (ZWL).
First and foremost, the government must mandate that all local payments by the Government of Zimbabwe (GOZ) be made in ZiG. This move would not only bolster confidence in the new currency but also ensure its widespread acceptance and use. Similarly, directing all duties, taxes, levies, and fees, including essential government services such as passports, to be paid in ZiG is essential. Such measures would create a solid foundation for the currency’s circulation and stability.
Another crucial step is the enforcement of the multi-currency regime, particularly in the fuel sector. Fuel stations should be directed to accept both ZiG and USD. This approach would ease the transition for the public and businesses, ensuring a smoother integration of the new currency into the market.
Unfortunately, at the moment, it’s not mandatory for fuel stations to accept ZiG. According to a FAQ (Frequently Asked Questions) document from the Reserve Bank of Zimbabwe, fuel stations are only encouraged to accept ZiG. The FAQ states,
“Will consumers be able to purchase fuel using the structured currency?
“The current pricing mechanism in the fuel sector will remain in place until otherwise reviewed. As Reserve Bank and Government work towards wider use of ZiG, the fuel sector will be encouraged to accept ZiG for fuel purchases.”
[Image Credit: Herald]
The liquidation of the 25% export retention surrender requirement is another area that demands attention. The government must set aside a budget to prevent the RBZ from resorting to the printing of money, a practice that has historically fueled hyperinflation and economic instability in Zimbabwe.
The presentation of a new budget statement in ZiG is also imperative. The rapid depreciation of the Zimbabwean dollar against the US dollar has rendered the 2024 budget obsolete. A supplementary budget that accommodates exchange rate fluctuations is necessary to maintain fiscal integrity and economic stability.
Lastly, the government must consider a downward review of taxes and the elimination of certain tax heads, such as the sugar tax. The current tax regime is contributing to inflation in USD, which, in turn, could lead to massive inflation in ZiG. A more balanced and equitable tax system is essential to prevent the erosion of purchasing power and to foster economic growth.
In conclusion, the success of the ZiG currency hinges on the government’s ability to implement comprehensive fiscal measures that complement the monetary policy. The call to action by Prof. Gift Mugano is a clarion call for the government to act decisively and strategically. Failure to do so could result in the ZiG currency suffering the same fate as the bond notes, with dire consequences for the Zimbabwean economy. The time for action is now, and the stakes could not be higher.
