ZiG Collapses As Black Market Resurfaces
The Zimbabwean dollar (ZiG) is rapidly losing ground as businesses increasingly reject the currency, favouring the U.S. dollar available on the resurging black market.
The black market exchange rate has soared to US$1:25 ZiG, starkly defying government regulations and highlighting the growing lack of confidence in the ZiG.
This blatant defiance undermines the government’s efforts to stabilize the currency, maintain its utility, and control inflation, further eroding consumer purchasing power and contributing to economic instability.
The official exchange rate remains at approximately ZiG14 to the USD, according to government figures, but this is increasingly irrelevant in the face of market realities.
State media reports indicate that some businesses in Bulawayo are resorting to tactics such as faking network issues with their point-of-sale (POS) machines to justify exclusive trading in foreign currency.
This practice is a clear indication of the deep-seated distrust in the ZiG.
In response, the Reserve Bank of Zimbabwe (RBZ)’s Financial Intelligence Unit (FIU) has established a hotline and WhatsApp number for the public to report businesses rejecting the local currency or using black-market exchange rates.
Despite these measures, enforcement remains a challenge.
In May, the government introduced Statutory Instrument 81A of 2024, aiming to punish those flouting exchange rate regulations. Under these regulations, individuals and businesses charging beyond the RBZ-gazetted exchange rate face a fine of ZiG200,000.
However, the penalties have done little to deter the widespread preference for the USD.
The Ministry of Finance, Economic Development, and Investment Promotion recently blacklisted over 50 contractors for supplying the black market after receiving payment for their services or goods.
This action underscores the systemic issues within the economy and the pervasive nature of the black market.
Presenting the mid-term monetary review in Parliament, Finance Minister Mthuli Ncube claimed significant progress in the phased de-dollarisation program aimed at re-establishing a mono-currency regime supported by a domestic currency to enhance local production and competitiveness in exports.
The recent fiscal policy review mandates presumptive tax payments in local currency, regardless of the currency used for business transactions.
Despite these measures, the collapse of the ZiG seems imminent. The pervasive reliance on the black market, coupled with widespread rejection of the ZiG by businesses and consumers alike, signals a bleak future for the currency.
The government’s efforts to enforce compliance and promote the local currency appear increasingly futile as economic realities override regulatory intentions.
