By Kudzaishe Chimonera
Zimbabwe must create stronger demand for the Zimbabwe Gold (ZiG) currency if it is to successfully transition to a mono-currency system, economist and Africa Economic Development Strategies (AEDS) Executive Director Professor Gift Mugano has said.
Speaking at the AEDS Midterm Economic Review and High-Level Policy Dialogue, Prof Mugano said the Treasury should take the lead by ensuring that more government transactions are conducted in ZiG, thereby increasing its circulation and public confidence in the currency.
“Treasury must create a demand for ZiG. One, by demanding payments in ZiG,” he said.
Prof Mugano noted that while the Government had already begun requiring some payments to be made in ZiG through Qualified Taxpayers (QPTs), the policy was being constrained by an inadequate supply of the local currency.
“That they are doing on QPTs, but there is no supply of ZiG,” he said.
He proposed that the Treasury surrender part of its United States dollar revenue to the Reserve Bank of Zimbabwe (RBZ), which would in turn issue an equivalent value of ZiG while retaining the foreign currency as part of the country’s reserves.
“Treasury must surrender U.S. dollars to Reserve Bank. For example, they can say any amount for start in a sequence approach, 3 billion they give to Reserve Bank. Reserve Bank print ZiG for them, give them ZiG. Back to back, that money is in the reserves,” he said.
According to Prof Mugano, such an arrangement would provide Government with sufficient ZiG to implement its policy of paying local suppliers in the domestic currency.
“Already Treasury made a decision that they’re going to pay local service providers in ZiG, but they don’t have the ZiG. That policy instrument, they can’t implement it,” he said.
He also called for fiscal incentives to encourage businesses to use the local currency, suggesting that taxes paid in ZiG should attract lower rates than those settled in US dollars.
“Taxes paid in ZiG, they are cheaper. Taxes paid in U.S. dollars, they are expensive. So you as a business, you keep the ZiG because you want to make savings on the back of the incentives of cheaper taxes on ZiG,” he said.
Prof Mugano further argued that allowing import-related payments to be made in ZiG would broaden the currency’s use across the economy and stimulate demand.
“The imports again in ZiG. In that way, they’re creating demand, which is working. And I can tell you, within a year or so, back to monocurrency,” he said.
Zimbabwe introduced the Zimbabwe Gold currency in April 2024 as part of efforts to stabilise the exchange rate and restore confidence in the country’s monetary system.
Authorities have repeatedly stated that the long-term objective is to increase the use of ZiG in domestic transactions while gradually reducing reliance on foreign currencies.
Prof Mugano’s proposals come as policymakers continue to debate the measures required to deepen the adoption of the local currency and support the country’s broader macroeconomic stability objectives.
