Online Reporter
Martin Kadzere
A LOCAL economic think tank, Africa Economic Development Strategies (AEDS), has proposed a comprehensive road map to transition Zimbabwe to a mono-currency system “as early as 2028” through the exclusive use of the local unit.
In an interview on the sidelines of the Mid-Term Economic Review and High Policy Dialogue in Harare last week, organised by AEDS, its executive director, Professor Gift Mugano, said the multi-currency regime heavily favours the United States dollar, effectively neutralising the impact of domestic monetary policies.
The policy proposal comes ahead of the 2026 Mid-Term Fiscal and Monetary Policy review, which will take stock of the impact of Zimbabwe’s macroeconomic stabilisation strategies and suggest interventions where needed.
While the Government had previously set a 2030 deadline to phase out the multi-currency framework, policy has since shifted away from rigid timelines.
The authorities now maintain that these specific economic milestones — referred to as “conditions precedent” — must first be achieved before the country can safely transition to a sole local currency to gain more leverage over the domestic economic trajectory.
Recent economic data indicates that Zimbabwe is on a firm path towards achieving these core fundamentals.
Driven by robust foreign currency inflows and prudent monetary discipline, the country’s foreign exchange reserves are steadily building, with two-month import cover likely to be achieved by year-end, moving closer to the targeted three-to-six-month safeguard.
Concurrently, the local currency exchange rate has maintained strong stability, trading within a predictable interbank range, while successfully containing the parallel market premium.
Backed by these strengthening buffers, annual local currency inflation now hovers within the single-digit range, establishing a stable macroeconomic foundation that economists believe will naturally cultivate public confidence and drive the market towards a mono-currency transition.
Prof Mugano noted that despite the Reserve Bank of Zimbabwe (RBZ) successfully keeping reserve money within safe limits at ZiG6,9 billion as of May 1, public memory of past hyperinflation continues to fuel heavy reliance on foreign cash for daily transactions and savings.
According to Prof Mugano, the central bank cannot resolve the currency’s limited circulation in isolation.
Instead, a deliberate fiscal effort is required to systematically “manufacture” domestic demand for Zimbabwe Gold (ZiG).
“We must confront the reality that our current multi-currency framework is heavily skewed in favour of the US dollar,” said Prof Mugano.
“As long as the greenback dominates daily commerce, it effectively neutralises the domestic monetary transmission mechanism, leaving the central bank with very few levers to steer the local economy.”
The primary recommendation from AEDS targets amending part of the Finance Act that dictates that companies pay their taxes in the exact currency they use to trade.
Under the current regulations, large exporters, such as mining firms, are legally required to liquidate 30 percent of their foreign currency earnings into ZiG under central bank mandatory retention laws.
However, because they are not compelled to utilise the local currency to settle their large tax obligations, these firms immediately crowd the interbank market to trade ZiG back for US dollars.
“Amending the Finance Act to mandate that major national tax heads like VAT (value-added tax) and duties be paid in local currency will fundamentally alter corporate behaviour from day one,” said Prof Mugano.
To sweeten the deal for industry and encourage compliance, Prof Mugano suggested that a preferential tax regime should be introduced.
Under this framework, economic agents paying their taxes and duties in ZiG would enjoy lower tax rates compared to those opting to or required to settle in US dollars, making transactions in the local unit financially advantageous.
This structural shift would fundamentally alter corporate behaviour, forcing firms to hold and utilise the local currency rather than immediately offloading it.
Crucially, Prof Mugano warned that this transition must not be rushed.
He emphasised that the policy approach should be “strictly staggered”, cognisant of the risk that an abrupt implementation could severely disrupt the markets, shatter fragile confidence and trigger runaway inflation.
“This transition must avoid the pitfalls of sudden policy shocks, which would rattle the markets, destroy fragile public confidence and risk runaway inflation,” he said.
“What AEDS is proposing is a strictly staggered, programmatic approach over the next two years that allows economic agents to adjust without disrupting industrial productivity.”
To safely expand the supply of ZiG without risking inflationary pressures through unbacked printing, the AEDS policy proposal outlines a regulated, cyclical liquidity framework.
Under this model, the Treasury would consider selling its foreign currency balances — accumulated from US dollar tax collections — directly to the central bank in exchange for ZiG.
This mechanism would achieve a dual purpose.
It would immediately increase the country’s official US dollar reserves at the Reserve Bank of Zimbabwe (RBZ), while providing Treasury with the necessary local currency liquidity to pay local contractors and service providers in line with its recent policy announcements.
Crucially, the RBZ would only issue the new ZiG in direct exchange for Treasury’s hard currency, ensuring that every single note or coin introduced into domestic circulation is fully backed by real-time foreign currency reserves.
Because the Government would have already established an active structural demand sink by requiring major corporate taxes to be settled in the local currency, this expanded liquidity would be naturally and productively absorbed by the business ecosystem.
Consequently, this managed circulation would fulfil domestic transactional needs without leaking excess liquidity onto the parallel market.
