Zimbabwe should adopt the Russian approach on the ZiG
Russia’s recent economic maneuvers provide a compelling alternative to Zimbabwe’s approach. After the imposition of Western sanctions, Russia took strategic steps to bolster its currency, the Ruble. One significant move was the requirement that all “unfriendly” countries pay for Russian gas and oil in Rubles. This shift not only created a direct demand for the Ruble but also reinforced national sovereignty over economic transactions.
By demanding payment in Rubles, Russia aimed to stabilise its currency and reduce the influence of the USD. The strategy was twofold: it diminished the reliance on foreign currencies and fostered a sense of economic resilience among its trading partners.
Lessons for Zimbabwe
Demand for Local Currency
For Zimbabwe, a similar strategy should be beneficial. By mandating that all goods and services within the country be priced and paid for in Zimbabwe’s own currency, the Zimbabwean Gold (ZiG), the government could create a newfound demand for its currency. This would require a robust framework to ensure that the ZiG is viable for everyday transactions.
Banning the USD
A complete ban on the use of the USD could further solidify the ZiG’s position in the economy. By eliminating the option to transact in USD, the government would force businesses and consumers to adapt to the local currency. While this would initially face resistance, especially given the historical context of hyperinflation, it could ultimately lead to a more stable economic environment if accompanied by sound monetary policy.
Fiscal Responsibility and Policy Reform
The success of such a strategy hinges on fiscal responsibility and comprehensive policy reform. Zimbabwe would need to implement measures to control inflation, establish a credible central bank, and foster an environment conducive to investment. This would involve restructuring existing debts, enhancing governance, and creating a transparent economic framework.
Public Awareness and Confidence Building
Restoring confidence in the local currency is crucial. Public campaigns to educate citizens about the benefits of using the ZiG, along with guarantees from the government regarding its stability, could gradually shift public sentiment. Additionally, incentivizing businesses to accept the ZiG through tax breaks or subsidies could encourage adoption.
Potential Risks and Challenges
While the proposed strategies hold promise, they are not without risks. The transition from a dollarised economy to a local currency system could initially lead to confusion and a lack of trust among consumers and businesses. There is also the danger of short-term inflation if the government does not manage the money supply effectively.
Moreover, in a globalized economy, external factors can significantly impact local currencies. If the global demand for commodities shifts or if international relations sour, Zimbabwe could find itself facing new economic challenges.
A Vision for the Future
The economic landscape of Zimbabwe presents a complex interplay of challenges and opportunities. By taking cues from Russia’s currency management strategies, demanding payments in local currency and banning the USD. Zimbabwe could potentially initiate a process of economic rejuvenation. However, this requires a commitment to sound fiscal policies, public education and a transparent governance framework.
The journey towards economic stability is fraught with difficulties, but with the right approach, Zimbabwe can cultivate a resilient economic environment where its currency holds value and its citizens can thrive. Only time will tell if the lessons from Russia can be effectively implemented, but the potential rewards of such a strategy are significant.
Engineer Jacob Kudzayi Mutisi
