Online Reporter
The Government’s efforts to entrench the Zimbabwe Gold (ZiG) as a credible domestic currency have, by and large, been judged through the narrow lens of exchange rate stability.
While a stable exchange rate remains crucial, it is only one ingredient in building a currency that households and businesses are willing to hold and use. Also important is making the currency cheaper, easier and more practical to transact in.
The measures outlined by Finance, Economic Development and Investment Promotion Permanent Secretary George Guvamatanga elsewhere on these pages point in that direction. Reducing the
Intermediated Money Transfer Tax (IMTT) on ZiG transactions, allowing tax-compliant companies to deduct IMTT from corporate tax liabilities, lowering bank charges and ensuring wider availability of ZiG banknotes address the transaction costs that have long discouraged use of the local currency.
Economics is, indeed, about incentives. Businesses and consumers naturally gravitate towards the payment option that offers the lowest cost and greatest convenience. By reducing the cost of using ZiG, Government is encouraging market participants to choose the local currency based on commercial logic rather than compulsion alone.
The reported increase in ZiG’s share of transactions to 45 percent during the agricultural marketing season suggests that incentives are beginning to influence behaviour. While seasonal factors undoubtedly contributed to the increase, the figures also indicate that lower transaction costs, coupled with improved exchange rate stability, can deepen currency usage across the economy.
The decision to reduce bank charges is particularly significant. High transaction fees effectively acted as a tax on financial inclusion and electronic commerce. Lower charges make digital payments more attractive, especially for small businesses and consumers conducting frequent, low-value transactions. Likewise, wider distribution of ZiG banknotes through ATMs improves accessibility and strengthens public confidence that cash will be available when needed.
Government’s decision to require payment of certain taxes and half of quarterly provisional tax obligations in ZiG also creates structural demand for the currency. Tax obligations represent one of the strongest sources of demand for any sovereign currency. When businesses know they must settle taxes in ZiG, they have a compelling commercial reason to accept it from customers, enhancing its role as a medium of exchange.
However, policy incentives alone cannot guarantee lasting success. Confidence remains the ultimate currency. Businesses will continue accepting ZiG willingly only if they remain convinced that its purchasing power will be preserved. This requires disciplined monetary policy, continued accumulation of foreign exchange reserves and a transparent, market-based foreign exchange system that minimises distortions and arbitrage opportunities.
Equally important is policy consistency. Our experiences with currency instability mean confidence is rebuilt slowly but can be lost quickly. Authorities must therefore avoid abrupt policy reversals that could undermine the credibility painstakingly built over recent months.
The measures should therefore be viewed as building blocks rather than the destination itself. Making ZiG cheaper to use, easier to access and necessary for tax compliance creates practical reasons to transact in the currency. Sustaining macroeconomic stability will provide the equally important reason to keep it. Together, these policies offer us our strongest opportunity yet to deepen the use of the ZiG through confidence, convenience and sound economic incentives.
