Sundaymail Editor
Persistence Gwanyanya
Consistent with the market- determined exchange rate management system being implemented by the Reserve Bank of Zimbabwe (RBZ), and in response to the call by the market to deregulate the economy, on April 15, 2025, the Government of Zimbabwe repealed Statutory Instrument (SI) 81A/2024 — which indexed prices of goods and services to the prevailing average interbank rate — through the enactment of SI 34/25.
While the immediate reaction by some analysts was to view the move as necessary but delayed, it is critical to underscore the importance of timing in policy discourse.
Deregulation of the pricing regime is happening at a time when the economy is generally stable on account of the complementary fiscal and monetary policies under the new normal of a stable structured currency — Zimgold (ZiG) introduced by the Government on April 5, 2024. Commendably, the ZiG currency, which attained its first anniversary on April 5, 2025, has shown permanent stability as evidenced by a consistent disinflation path and stable exchange rate dynamics.
The pricing competitiveness brought by low and stable inflation will minimise the risk of arbitrageurs, speculators and currency entrepreneurs preying on the new pricing regime, which is the fear expressed by some analysts.
Businesses that may try to unjustifiably hike ZiG prices in a stable environment where demand for ZiG is robust will price themselves out of business.
As such, the move by the Government to deregulate prices under the circumstances should be viewed as a bold statement about its commitment to permanent stability.
It is envisaged that the tight monetary policy stance, which is largely responsible for current stability, will be supported by robust demand for ZiG to produce permanent stability.
In October 2024, the Government passed legislation for 50 percent corporate taxes to be paid in ZiG, whilst announcing in the 2025 National Budget that more measures to drive demand for ZiG were in the pipeline.
Robust demand for ZiG is necessary to cure the rejection effect, which occasioned sustainable currency premiums on pricing.
The rejection effect is typified by application of disproportionately higher exchange on ZiG pricing to attract foreign currency (forex) and thus effectively reject the local unit in trading of goods and services.
This will no longer be sustainable in the projected environment.
Clearly, the new pricing regime calls for a more responsive approach to competitiveness and value creation, which emphasise efficiency, innovation, quality and customer experience.
This is arguably a break from the past where value creation was based on speculation, arbitrage and currency manipulation.
Importantly, pricing deregulation is happening amid growing concern about the unintended consequences of SI 81A/2024,
especially to the formal sectors of the economy.
The market is concerned about the growing risk of corporate stress in the economy, which is partly blamed on an uneven business environment on account of unfair advantage of the informal sector because of non-compliance with pricing and other regulations.
Now, building on the success of the flexible exchange rate regime in a tight ZiG environment, typified by improved access to forex from interbank market deregulation of the pricing regime, will extend benefits especially to the formal retail and wholesale sectors, which were struggling to compete with the informal sector.
It is comforting to note that the interbank market has been meeting the full forex requirements of customers, which explains the stable environment currently obtaining in the economy.
Improved access to forex on the interbank market is expected to attract players into the formal sector.
The increase in international reserves since the introduction of ZiG is encouraging as it guarantees the unit’s convertibility.
International reserves stood at about US$600 million by March 31, 2025, providing more than three times cover.
Durable stability is seen as addressing the value preservation of society, thus reducing demand for forex.
Commendably, reflecting the need to support demand for ZiG and value preservation needs of the economy in the face of the recent deregulation of pricing, the RBZ is injecting gold coins through the financial services sector.
As the Government seeks to improve competitiveness of the operating environment, Treasury indicated that measures to deregulate the economy will be announced during the course of the year.
Proposed deregulation will include a review of the number and cost of licences required to operate a business in Zimbabwe.
Stability is good for everyone.
It is very difficult for an economy to grow sustainably in an unstable environment.
A US$100 billion economy is capable of delivering more billion-dollar companies than a US$10 billion economy.
Similarly, it is impossible for any business or individual to be richer than their country.
To currency entrepreneurs, including manipulators, speculators and arbitragers, the misguided belief that one can build success by enterprising on currency cannot be sustained and is, therefore, misguided.
As we celebrate our independence, let us remember the supreme sacrifice by our gallant fighters and guard jealously the legacy they fought and died for.
As policymakers extend economic freedom in both forex and goods, as well as services markets, let us always remember that we carry responsibility to one another.
If we all act responsibly, we will succeed as a country and deliver a more prosperous economy to the next generation.
Persistence Gwanyanya is an economist and member of RBZ’s Monetary Policy Committee. He is also the founder and CEO of Bullion Group International. For feedback, email [email protected]
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