The Zimbabwe Gold (ZiG) has lost 80% of its value on the black market since its introduction, with retailers claiming that the government’s fixed exchange rate is detrimental to their survival. The Retailers Association of Zimbabwe warns that unless monetary policies change, formal retailers may close due to rising costs and the preference of consumers for informal market transactions.
The Zimbabwe Gold currency, known as ZiG, has experienced a drastic devaluation of 80% in the black market since its introduction in April. Retailers are expressing serious concerns regarding the government’s maintenance of an official exchange rate, which is leading to significant financial losses and price volatility, putting the viability of formal retail shops at risk. The Retailers Association of Zimbabwe (RAZ) has been vocal in communicating its displeasure to the Reserve Bank of Zimbabwe (RBZ), arguing that the current rate of ZiG13.9 to US$1 is unsustainable and detrimental to their operations. Initially introduced to stabilize the country’s turbulent economy and high inflation rates, ZiG has instead resulted in a distorted pricing structure characterized by a two-tier currency system. Retailers contend that while the official exchange rate is purportedly stable, suppliers are increasingly pricing goods based on significantly higher black market rates, which consequently forces formal retailers to adjust their prices accordingly or face substantial losses. As it currently stands, many shops have resorted to switching off their point of sale machines to avoid processing transactions in ZiG, preferring transactions in more stable currencies like the US dollar or South African rand. Consequently, consumers are increasingly avoiding formal retail shops in favor of those that circumvent the ZiG system altogether. For instance, a popular washing powder brand’s pricing illustrates this balance, wherein the difference between official wholesale pricing in ZiG and actual costs demanded reflects a skewed rate reliant on black market conditions. Observers, including sole traders, have noted a troubling pattern in Zimbabwe’s economic history, wherein newly introduced currencies are ultimately met with spiraling inflation, primarily driven by black market dynamics and government policies perceived to be disconnected from economic realities. The RAZ has put forth recommendations urging the government to adopt a market-determined exchange rate to restore confidence in the local currency. The sentiment among Zimbabweans reflects an enduring skepticism of local currencies, despite purported hard-backed mechanisms, amplifying the call for financial reform.
The introduction of the Zimbabwe Gold currency (ZiG) was intended to provide a stable financial instrument in the face of rampant inflation and economic instability in Zimbabwe. However, the persistence of a vibrant black market for foreign exchange has complicated the effectiveness of such currencies, and official government policies regarding rates have often failed, resulting in tangible losses for businesses reliant on formal economic structures. The current dynamics depict a dual system where informal markets dictate prices, often rendering governmental measures ineffective. This predicament highlights deeper economic challenges faced by the country and the need for comprehensive reform.
The Zimbabwe Gold currency, contrary to its intended purpose of economic stabilization, is undermining formal retailers due to its rapid devaluation in black markets and the government’s rigid exchange rate policies. The Retailers Association of Zimbabwe has called for a realignment of monetary policies to better reflect market realities, warning that continued disregard for the economic implications may lead to an unviable retail environment and heightened inflationary pressures. The situation serves as a reminder of Zimbabwe’s historical struggles with currency stability, bringing to light the need for interventions that restore consumer and retailer confidence.
Original Source: www.news24.com
