Online Reporter
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The Zimbabwe Association of Pension Funds (ZAPF) says although the planned shift to a domestic mono-currency regime will bring positive spinoffs for the economy, it should be carefully managed to protect pension assets and restore confidence in the retirement savings sector.
Zimbabwe uses a multicurrency monetary system dominated by the US dollar and Zimbabwe Gold (ZiG), but plans to switch to a domestic mono-currency from 2030.
The roadmap for the currency transition is outlined in the National Development Strategy 2 (NDS2, 2026-2030), which will guide economic planning and development towards the country’s Vision 2030 target of an upper-middle-income economy.
A strong domestic currency (ZiG) will enable the country to regain monetary control, stabilise prices, boost local industrial performance and competitiveness, simplify planning and achieve full economic sovereignty, while reducing vulnerability to US dollar shocks.
Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube is, however, on record stressing that the country will only shift to a domestic monocurrency when all key fundamentals have been achieved.
The key fundamentals, the minister said, include fiscal discipline (low budget deficit, controlled spending), foreign currency reserves (3-6 months import cover), monetary policy credibility (inflation targeting) and stable exchange rates
On the currency front, the ZiG currency has already proved its mettle, remaining largely stable since its introduction in April last year, while the country has witnessed a drastic fall in inflation and the exchange rate remained largely stable.
Further, fiscal discipline and tight monetary policy have been the biggest factors in restoring stability and confidence in the domestic currency, while Zimbabwe has seen rapid growth in foreign currency reserves to US$1 billion by October 31, equivalent to about 1,2 months of import cover
This comes as the insurance industry has been pondering the implications of the proposed currency change on existing contracts and policies.
In its analysis of the NDS2 and the 2026 National Budget, ZAPF said the proposed currency road map showed positive intent by authorities, particularly the cautious approach to avoid mistakes similar to the currency of 2019, which eroded pension values and savings.
“Under NDS2, the Government commits to a market-led transition to a mono-currency regime, with clear preconditions that must be met before full adoption.
“These include durable macroeconomic stability marked by single-digit inflation, foreign currency reserves sufficient to cover between three and six months of imports and a stable, market-determined exchange rate.
“This policy direction will have a significant bearing on the pension sector and will shape the investment, regulatory and operational environment for pension funds over the next five years,” ZAPF said.
To reinforce opportunities arising from the proposed currency framework while mitigating risks, the ZAPF said it would engage fiscal and monetary authorities to ensure stronger legal protection of pension assets.
“The association will push for the ‘Asset Protection Clause’ contained in NDS2 to be formally codified into a Statutory Instrument,” reads part of the report.
It highlighted that the association also urged trustees to adopt strict asset-liability matching, particularly along currency lines.
“US dollar liabilities must be backed 100 percent by US dollar assets,” ZAPF said, adding that Zimbabwe Gold (ZiG) contributions should continue to be invested in inflation-hedging real assets, while maintaining adequate liquidity to support member exits.
In terms of investment strategy, ZAPF said pension funds could continue increasing exposure to assets with intrinsic value irrespective of currency denomination, such as real estate, export-orientated equities in mining and tourism, and gold coins.
ZAPF said NDS2 explicitly acknowledged that the 2009 and 2019 currency changes eroded confidence in the pensions system; as a result, the Government had committed to rebuilding trust by resolving outstanding pre-2009 pension and insurance compensation cases.
“The strategy mandates fair compensation to affected pensioners and policyholders, with the process to be enforced through amendments to the Insurance and Pensions Commission (IPEC) Act and the Pensions and Provident Funds Act,” ZAPF said.
However, ZAPF warned that compensation remains the most significant financial risk facing the industry.
The association said there was a high feasibility risk if the compensation methodology required payouts that exceeded the current asset base of pension funds.
ZAPF said research by the Actuarial Society of Zimbabwe, which has been shared with the Government and regulators, indicated that the current estimated compensation cost was almost equivalent to the total net asset value of the pension industry.
“A new compensation methodology is under development and the industry is awaiting further guidance from the regulator,” reads part of the report.
The association also raised concerns about potential liquidity challenges, noting that even where funds hold assets such as property, they may lack sufficient cash to meet lump-sum compensation payments, and this could trigger forced asset sales, with negative spillovers for the real estate and equity markets.
In addition, ZAPF noted that the administrative burden associated with calculating member prejudice has already increased costs for pension funds, with the risk that further adjustments to the compensation framework could reduce expense efficiency across the sector.
As part of its proposed mitigations, ZAPF recommended that the Government consider a compensation model centred on means-testing and social protection, ensuring that limited resources are targeted at pensioners most in need.
