The government’s efforts to promote the use of the Zimbabwe Gold (ZWG or ZiG) faced a major setback last week when the Grain Marketing Board was compelled to pay wheat farmers exclusively in United States dollars.
Farmers rejected payment in local currency, citing its sharp depreciation against the US dollar and arguing that they purchase their inputs in foreign currency.
Economists have warned that paying wheat farmers in US dollars could lead to a broader rejection of the local currency by other farmers and exporters, undermining efforts to build foreign exchange reserves.
Sources cited by NewsDay revealed that wheat farmers threatened to withhold their harvest in protest over payments made in ZWG, fearing potential losses.
During the 2023 winter wheat season, farmers received US$440 per tonne, with payments split 75% in US dollars and 25% in Zimbabwe dollars at the prevailing interbank rate.
This season, the new producer prices for wheat are set at US$450 per tonne for standard grade and US$470 for premium grade, with payments made exclusively in US dollars.
Former president of the Zimbabwe Commercial Farmers Union, Wonder Chabikwa, told NewsDay that payments in US dollars would alleviate the financial burden of farming costs. He said:
As wheat farmers, we have always preferred to be paid in USD directly because we are always seized with recapitalising our farms in terms of irrigation infrastructure and farming inputs.
To be able to acquire these things, we need foreign currency. Most providers of these services want to be paid in foreign currency so it is making life very difficult for us.
Zimbabwe National Farmers Union president Monica Chinamasa said the GMB should pay farmers timeously so that they hedge against losses. She said:
We prefer to be paid in the USD component because all our financial obligations are in USD.
We pray and hope it will be paid in time, not six months down the line when interest will have accumulated on our obligations.
The Zimbabwe Gold (ZiG), introduced in April 2024, marks Zimbabwe’s sixth attempt in 15 years to establish a stable currency.
Reserve Bank of Zimbabwe (RBZ) governor John Mushayavanhu said that the ZiG would be backed by foreign exchange and gold reserves.
At its launch in April, the ZiG was trading at 1:13.50 against the US dollar. Currently, it has reportedly depreciated significantly, trading between 1:25 and 1:30 on the black market.
This depreciation has led some service providers to price their goods exclusively in US dollars.
Retail chains have largely abandoned the official exchange rate, opting instead to charge prices based on the street rate and have also increased prices in USD.
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