Online Reporter
WITH some filling stations now accepting ZiG for a limited number of fuel sales, a significant start has been made on opening the door into the most dollarised part of the economy.
The tentative steps are built around two major fundamentals, two related victories so far in the economic reforms introduced by the Second Republic and backed by the practical steps of both the Ministry of Finance, Economic Development and Investment Promotion and the Reserve Bank of Zimbabwe.
For a start, Zimbabwe has been running a positive balance of trade for over six months and that means the banks, who run the market-based purchase and sale of foreign currency in the formal sector and so set the exchange rate, have enough foreign currency from willing sellers to pass on to all the willing buyers for approved imports and other approved payments.
The current account has been in surplus for much longer, that is foreign currency inflows exceed foreign currency outflows, but these inflows include diaspora remittances, which largely have been under the control of those private people receiving the money.
These remittances, often passing through many hands, have largely been funding the informal sector and a large slice of the petroleum imports.
The trade account surplus on the other hand is firmly anchored in the formal sector and the banks, and so it was only a matter of time before ZiG sales of fuel started.
The second condition is that anyone voluntarily dealing in ZiG wants a stable ZiG with low inflation so that when it is received or banked the seller knows it will maintain its value.
The stable exchange rates and the low interest have been the case for 18 months now, since the end of 2024, and so confidence has been rising.
One sign of that confidence in the formal sector has been the decision by retailers, who for more than a year have been allowed to set their own exchange rates, to reduce their premium on the interbank rate to a very low level.
So the rest of the formal economy has largely accepted free use of ZiG and that must have given a lead to the petroleum industry.
Petroleum fuels are one of our major imports.
For some years, they have been readily available, so readily that there has been a boom in service station investment to sell fuels, but with most fuel imported or paid for at the depots being transacted with legally held foreign currency not subject to control by banks.
Most of those funds have originally come from the diaspora remittances, although usually passing through many hands before they are spent on fuel, supplemented by the foreign currency legally retained by exporters who use some of their holdings to pay for fuel.
When the scheme was introduced, it conveniently filled the gap in the then negative trade balance. Now the trade balance is positive, a new climate emerges. The present steps by the service stations are definitely baby steps.
Drivers have already noted that the sellers are using a range of exchange rates and still have their prices and the calculated figures on the pumps in US dollars, and so avoid the ZiG prices set by the regulator.
But it also means that one block of consumers that used to use the black market to obtain money to buy fuel can now get at least some of their requirements in ZiG, at a lower rate, and that will add to the already large market-related pressures that have already tamed the black market and have been cutting it back.
One factor that must have helped initiate the decision by some service stations is what many believe is significant overtrading in the retail fuel sector, with a large number of new service stations being built in recent years.
Competition must be rising, and so offering a reasonable innovation to obtain a bit more market share, such as accepting some ZiG, might well make good business sense.
These baby steps are moving in the right direction and as reforms continue and exports continue rising faster than imports, we can expect the ZiG to remain a strong currency and the steps to become longer and surer.
The Reserve Bank, with its highly conservative monetary policies, is certainly making sure that the ZiG remains strong, and the combined efforts of Government and the Reserve Bank to build up gold and foreign currency reserves, now over US$1,5 billion, continually build up the confidence.
It is important to note that the moves to accept ZiG for fuel are market driven, not set by the authorities, and so they will last and grow.
The authorities have made sure we have a decent currency, and now people are starting to use it a lot more.
