The Zimbabwe Gold currency (ZiG), introduced in April, has lost 80% of its value in the black market, leading to severe financial strain on formal retailers. These businesses are advocating for the government to reassess the unsustainable official exchange rate, which is complicating transactions and fostering a dual currency system. Suppliers are pricing based on unfavorable black market rates, pushing consumers towards informal retailers.
Since the launch of the Zimbabwe Gold currency (ZiG) in April, its value has depreciated by 80% in the black market. Retailers have voiced concerns that the government’s enforced exchange rate is causing significant financial strain, jeopardizing the existence of formal retail establishments. Rather than stabilizing the economy and countering soaring inflation, the ZiG is amplifying price volatility and fostering a dual monetary system, according to the Retailers Association of Zimbabwe (RAZ). Major retailers such as TM Pick n Pay, OK, and Edgars have urged the Reserve Bank of Zimbabwe (RBZ) to reconsider the current exchange rate, which is pegged at US$1 to ZiG13.9. They argue that this rate is unsustainable and detrimental to business operations. Facing an acute shortage of foreign currency, suppliers are compelled to base their pricing on the more favorable black market rates, further complicating transactions for formal retailers. Many establishments are opting to disable their point-of-sale machines to avoid financial losses associated with ZiG transactions. As a result, consumers are increasingly gravitating towards informal retailers that do not accept ZiG. The situation exemplifies the broader challenges that have plagued Zimbabwe’s economy, with past currencies undergoing a similar cycle of inflation and devaluation. The RAZ is advocating for market-driven exchange rates to restore confidence in local currency. Citizens remain skeptical of the efficacy of government-backed monetary policies, recalling previous instances of currency instability.
The context of this issue traces back to the introduction of Zimbabwe’s Gold-backed currency—ZiG—in a bid to tackle endemic inflation that has devastated the economy. The government’s intention was to create a stable medium of exchange; however, the stark disconnect between the official exchange rate and the realities of the black market has resulted in crippling financial consequences for formal retailers. Zimbabwe has experienced significant currency volatility in the past, making the population wary of government initiatives that claim to provide stability while failing to address underlying economic challenges. The dual-natured pricing system that has emerged highlights the urgent need for remedial action, as formal businesses struggle to compete with the informal market.
In summary, the introduction of the Zimbabwe Gold currency (ZiG) has not yielded the intended economic stability, instead leading to significant devaluation and exacerbating existing market challenges. Retailers are imploring the government to reassess the official exchange rate that is presently harming their operations and driving consumers towards informal markets. The RAZ advocates for a more flexible approach to currency exchange, urging the authorities to allow market forces to determine rates. Ultimately, without intervention, the formal retail sector may face widespread closures due to unsustainable economic conditions.
Original Source: www.news24.com
