The Confederation of Zimbabwe Industries (CZI) has raised concerns that shortages of US dollars on the official foreign exchange market may threaten the stability of the newly introduced ZiG (Zimbabwe dollar) currency. This comes amid rising parallel market exchange rates, now exceeding US$1: ZiG 22, which are driving inflation and undermining the local currency’s viability.
The rapid depreciation of the ZiG on the parallel market has spurred inflationary pressures, with economic stakeholders warning that the local unit’s future could be in jeopardy without timely intervention. The industry lobby group has pointed to critical foreign currency shortages on the official market as a key factor that could erode confidence in the ZiG.
“Some companies are struggling to obtain foreign exchange on the official market, which will likely undermine the acceptability and use of ZiG,” the CZI said in a statement. “On July 25, 2024, the Reserve Bank of Zimbabwe (RBZ) acknowledged a build-up in demand for foreign currency, putting pressure on the official exchange market.”
Despite the introduction of the ZiG, the CZI noted that the economy remains largely dollarized, with businesses increasingly reliant on the US dollar. For instance, Hippo Valley Estates, a major sugar producer, has reported difficulties managing its revenue and expenditure due to a growing mismatch between ZiG and US dollar transactions. While the company’s revenues have seen an increase in ZiG-denominated sales, suppliers of raw materials have largely rejected the local currency, demanding US dollars instead.
The business community has also voiced concerns over the scarcity of foreign currency on the Interbank Market, where the government remains the sole seller. Some analysts believe that the suspension of the Foreign Exchange Auction System, which previously provided companies access to foreign currency, has further destabilized the local currency, pushing businesses to seek dollars on the parallel market.
While authorities have attempted to reassure the public that the situation will stabilize, the CZI has called for deeper economic reforms to ensure the viability of the ZiG and the broader economy. Without these reforms, the risk of further erosion of the local currency’s value could increase, threatening economic stability in Zimbabwe.