By Business Reporter-The Zimbabwean government is scrambling to rescue the collapsing ZiG currency, taking desperate steps that fail to address the core economic issues holding back the country’s recovery.
Instead of tackling fundamental problems like production, the rule of law, and human rights abuses, which are necessary to attract foreign direct investment (FDI), authorities are relying on superficial interventions such as more taxes on businesses and injecting US dollars into the market.
The Reserve Bank of Zimbabwe (RBZ) Governor, Dr. John Mushayavanhu, acknowledged that the government is attempting to stabilize ZiG by enforcing quarterly tax payments starting this week and pumping US dollars into circulation to meet the growing demand, especially after recent exchange rate volatility on the parallel market.
However, these interventions ignore the underlying structural issues plaguing Zimbabwe’s economy.
The depreciation of ZiG is not merely a result of “transitory foreign currency demand pressures,” as claimed by authorities.
It stems from deep-seated economic instability, eroded investor confidence, and the government’s unwillingness to implement reforms that could create a conducive environment for FDI.
While monetary authorities argue that the current depreciation is driven by seasonal pressures, such as preparations for the cropping season, the reality is that the economy is in freefall, and businesses are scrambling to hedge against the deteriorating exchange rate.
Price hikes in goods and services reflect retailers’ efforts to protect themselves from the unpredictable currency fluctuations.
Dr. Mushayavanhu insists that the depreciation is due to “negative sentiments” about ZiG’s sustainability rather than actual economic fundamentals.
He points to increased foreign currency receipts, which grew by 13.4% from January to August 2024, compared to the same period in 2023, as evidence that the problem is speculative.
Yet, this narrative glosses over the fact that Zimbabwe’s business environment is deteriorating rapidly due to widespread corruption, poor governance, and an unpredictable regulatory landscape.
To prop up ZiG, the government has directed businesses to split tax payments between ZiG and US dollars, hoping to boost demand for the struggling local currency.
At the same time, the RBZ has injected over US$110 million into the market and released an additional US$12 million through export surrender requirements.
These efforts are backed by an increase in precious mineral reserves, but they do little to solve the underlying economic crisis.
Economist and RBZ Monetary Policy Committee member Mr. Persistence Gwanyanya suggests that the volatility is temporary and will stabilize with central bank interventions.
Yet, these measures are merely short-term fixes that cannot resolve the deeper issues strangling Zimbabwe’s economy.
Without addressing production capacity, ensuring respect for the rule of law, and upholding human rights, the government’s efforts to save ZiG will remain futile.
Investors continue to shy away from Zimbabwe, and the country’s dire economic situation persists, despite cosmetic monetary interventions.
As long as the government avoids the real reforms needed for long-term growth, ZiG’s collapse is inevitable.