Online Reporter
Public procurement accounts for around 17 percent of the country’s gross domestic product.
Because the Government is the single biggest customer in the economy, its spending is a potent instrument to propel changes in service delivery, stimulate private sector growth, create jobs, fight poverty and so on.
That is why we say, due to the foregoing and other factors, the recent decision by the Government to exclusively use the ZiG in all its domestic procurement will, indeed, be market-moving.
“The Government of Zimbabwe will lead in the use of the local currency, and as a result, payments to local suppliers will be made solely in the local currency,” Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube said in a release on Friday.
When the Government introduced the ZiG in April 2024, the note accounted for about 26 percent of all local transactions, with the dollar accounting for the lion’s share of up to 70 percent.
However, the ZiG has gained ground over the past two years as it is now being used to settle about 43 percent of all transactions in the economy.
Its role will certainly grow bigger henceforth as the Government is now using it to settle all its invoices.
This is a huge step on the road to the reintroduction of the local currency for all transactions in the economy. The target for monocurrency is 2030, but that would depend on a number of milestones being achieved and maintained.
We have seen activity on the parallel market slowing markedly. When, in the past, most people would use their ZiG to buy foreign currency as soon as they got it, now they are keeping it for longer. It has held its own at around 26 to the dollar over the past year, with the parallel market premium narrowing from 100 percent previously to less than 20 percent.
Exclusive ZiG usage by the government not only bolsters this growing public confidence in it but also entrenches it in the market.
We urge the Government to maintain that stance.
While the long-term goal is to see the ZiG being the sole legal tender in the country, it is important for the market to know that the Government’s move does not mean the abandonment of the multi-currency system.
The central bank has made that clear, noting also that suppliers who will be paid in ZiG will, if they so wish, be able to access foreign currency on the market as the country has enough of it.
Making it all clear was a good move, so that the transacting public doesn’t guess and panic.
With the Government now leading in the usage of the ZiG, there is no reason why anyone or any company would not have confidence in it.
