Plans To Make ZiG Sole Legal Tender Unsettles Banks
The recent comments by President Emmerson Mnangagwa regarding plans to make the Zimbabwe Gold (ZiG) the sole legal tender in the country before 2030 have prompted banks to adopt a more cautious approach to long-term lending.
In October 2023, the government gazetted Statutory Instrument (SI) 218 of 2023, which extended the use of the multiple-currency system in Zimbabwe until December 2030.
But in his address at the commissioning of the Mutare Teachers College’s fruit juice and water processing plant on July 4, 2024, President Mnangagwa hinted that if ZiG maintains stability, dollarisation may end in two years. He said:
In two years, in fact two years is too far off, but there will come a time when our ZiG currency has fully penetrated the market, then I will give a directive that the country will be using the ZiG only.
A top industrialist, who asked not to be named, told The Independent that Mnangagwa’s comments have made banks adopt a cautious approach, trying to determine whether the President’s comments were a policy statement or merely political rhetoric. Said the industrialist:
There are political statements and there are policy statements; what I was hearing is that it was a political statement.
I think what the President was saying is the goals for 2030 might happen earlier, not necessarily saying this is what was going to happen.
What banks have been trying to do is establish certainty in what is going to happen next.
So, they have not gone to anyone to say we are not lending but they are not doing anything. They are waiting for clarity; they are trying to understand whether this is a policy or a political statement and establish a level of comfort before they continue with long-term lending.
It will be harmless to continue until 2030 with a stable local currency in a multi-currency environment.
What authorities should be uncomfortable with is when the US dollar begins to affect the stability of the ZiG.
A top business leader said many companies had been struggling to access loans for a long time. Said the business leader:
Regarding the President’s remarks about de-dollarising by 2028, this, in my view, has to be taken in the context of the well-articulated and publicised plan by the government to end the country’s reliance on the USD and establish the ZiG as the sole local transacting currency.
Accordingly, we still stand guided by Statutory Instrument 218 of 2023, being aware that the government’s aim is to achieve the mono-currency position before December 31, 2030.
The challenges of accessing long-term funding cannot be solely attributed to the President’s remarks. Access to finance, more so, long-term funding has been a perennial problem.
What would help resolve this challenge would include policy consistency and predictability, among other factors.
As such, pronouncements that are in line with policy would not be expected to cause market shocks of grave significance.
In November 2023, Finance, Economic Development and Investment Promotion Minister Mthuli Ncube stated that the government’s decision to enact SI 218 of 2023 was prompted by the banks’ refusal to lend money in both the Zimbabwe dollar and the United States dollar. Ncube said at the time:
We are headed for mono currency, let’s be clear about that, but we want order. So the extension to 2030 was to create order and calm in the market.
More: Pindula News
