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Economist Professor Gift Mugano has called on the government to clarify the relationship between the value of the Zimbabwe Gold (ZiG) currency and gold, as well as other precious metals.
Mugano asserted that the government appears to have changed its stance on exchange rate determination and should provide an explanation of how fluctuations in gold prices affect the ZiG exchange rate.
Posting on X, Mugano noted that when the Reserve Bank of Zimbabwe (RBZ) launched the ZiG in April 2024, the initial exchange rate of ZiG to USD was calculated as follows:
<blockquote>
– ZiG1 = 1 milligrams of gold (ZiG1 = 1/1000)
– Price of 1 gram of gold on 5 April 2024 = US$73.3
– 1 milligrams of gold (i.e., ZiG1) = 73.3/1000 = US$0.0733
-Using a direct formula of exchange rate determination, US$1 = 1/0.0733 = ZiG13.64
If we use the same formula &amp; take into account the price of gold which has since shot to US$85.52 per gram (i.e., US$2,653.25 today), our new exchange should be:
US$1 = 1/0.08552 
US$1 = ZiG11.69
Ko US$1 = ZiG25 (exchange rate after devaluation) yabvepi?
Please give us the correct government position on the ZiG exchange rate determination &amp; gold price movement nexus so that we can speak we are guided accordingly.
</blockquote>
Mugano also urged the government to reconcile statements made by Finance Minister Mthuli Ncube on Wednesday with an excerpt from the RBZ’s Monetary Policy Statement (MPS) that explains the value of the ZiG in relation to other currencies. An extract of the MPS reads as follows:
<blockquote>
17. What is going to determine the exchange rate of the structured currency in relation to other currencies?
The starting exchange rate shall be determined by the prevailing closing interbank exchange rate as at 5 April and the London PM Fix price of Gold as at 4 April 2024. The intervening exchange rate shall be determined by the inflation differential between ZiG and USD inflation rates and the movement in the price of the basket of precious minerals held as reserves. The weights will be determined by the composition of reserve assets.
</blockquote>
Mugano was responding to remarks made by Minister Ncube during an interview with journalists in Mt Hampden on Wednesday, following President Emmerson Mnangagwa’s State of the Nation Address (SONA) to Parliament.
During the interview, Ncube was asked to explain the central bank’s decision to devalue the ZiG by 42.55 per cent against the United States dollar while gold prices were on the rise.
In his response, Ncube stated that although the ZiG is backed by gold, its exchange rate is not fixed to gold prices. He said:
<blockquote>
There is a difference in fixing an exchange rate and there is a difference in backing an exchange rate. Gold backs the exchange rate. So as I speak, our reserves are about US$370 million.
And the central bank has been intervening in the market and has been able to sell the gold which is backing the ZiG to supply the market with much-needed US dollars for importation purposes.
</blockquote>
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Pindula News

Economist Gift Mugano wants government to explain how gold prices affect ZiG exchange rate. When ZiG launched, 1 USD = ZiG13.64, now should be ZiG11.69. Mugano asks for clear government position on ZiG exchange rate and gold price connection. Mugano also wants government to clarify statements made by Finance Minister Mthuli Ncube on ZiG devaluation. Ncube says ZiG backed by gold, but exchange rate not fixed to gold prices. Central bank selling gold to get US dollars for imports.

"Exchange Rate Should Be ZiG11.69 Per US$1"

Economic commentator Gift Mugano has warned the Reserve Bank of Zimbabwe (RBZ) against floating the exchange rate without adequate foreign currency reserves.
Mugano said the move by Zimbabwe’s central bank on Friday, 27 September, to liberalise the ZiG currency is “suicidal” adding that the RBZ “just put nail on the ZiG coffin.” He said:
<blockquote>
In our instance, I think we are now at a deeper end. We are in the middle of the storm, that we have adopted a local currency, we do not have enough reserves and we are supposed to liberalise.
So, it’s like committing suicide and again if you don’t liberalise you are still committing suicide again. We need to go back to the drawing board and say how do we address this.
</blockquote>
Instead of liberalising the exchange rate, Mugano suggested that the RBZ should scrap the ZiG, return to USD mono-currency, and introduce the ZiG when the time is ripe – when the right fundamentals are in place.
A Harare-based economist, who declined to be named for professional reasons, told <a href="https://www.businessweekly.co.zw/gold-backed-currency-fails-to-stem-zims-economic-challenges/">Business Weekly</a> that liberalisation and maintaining controls present significant risks, and “there is no easy solution.” Said the economist:
<blockquote>
The Reserve Bank of Zimbabwe is facing a daunting task. Liberalising the foreign exchange market could lead to hyperinflation while maintaining controls could exacerbate shortages and inefficiencies.
The Government must carefully consider the potential consequences of both options.
A poorly executed liberalisation could have disastrous consequences for the economy.
The best solution for Zimbabwe may lie in a gradual and carefully managed approach to liberalisation, combined with targeted measures to address the underlying causes of economic instability.
</blockquote>
On Friday, September 27, the central bank devalued the ZiG by over 40% against the US dollar, changing the exchange rate from 14.1 ZiG per dollar to 24.3 ZiG per dollar.
However, the RBZ has not clarified whether the currency will float freely or if it will continue to control the exchange rate after the devaluation.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Economic expert Mugano warns that Zimbabwe should not float the exchange rate without enough foreign money. He thinks doing this is like killing the ZiG currency. Mugano suggests Zimbabwe should go back to using USD only and bring back the ZiG later when everything is ready. Another economist says liberalizing or controlling the exchange rate both have risks. Zimbabwe needs to be careful and make smart decisions to avoid making things worse. The central bank devalued the ZiG by 40% on September 27, but it's not clear if they will let it float freely or control it.

Floating The ZiG A Dangerous Move, Warns Mugano

Local economist Gift Mugano has warned the government against hastily banning the current multi-currency regime and making the Zimbabwe Gold (ZiG) currency the sole legal tender.
Mugano made the comments in response to calls from some sectors to eliminate the use of the United States dollar, particularly as the local currency has experienced rapid devaluation on the parallel market just five months after its introduction. Wrote Mugano:
<blockquote>
I hear repeated calls for the introduction of mono-currency in favour of ZiG (banning USD).
My 2 cents advice is that if GoZ bans the USD it will be the biggest loser because the informal sector will not dump the USD – GoZ will lose tax in USD.
Policy only works in a formal economy. In circumstances where the informal sector is so huge, IT CANNOT WORK!
Where we are, GOZ must let USD work as a mono currency &amp; work on establishing the right fundamentals for the introduction of a local currency which inter alia include:
1. Building a productive &amp; competitive economy
2. Building foreign currency reserves averaging 6 months import cover (US$4.5 billion)
3. Fiscal consolidation – reducing public debt to levels averaging 30% of GDP
4. Stable exchange rates with distortions not exceeding 10%
5. Current account surplus
6. Single digit inflation
7. Establishment of strong institutions with enough teeth to rein corruption &amp; other social ills including fostering rule of law
8. National cohesion – credible elections, elimination of toxic politics, no crackdown of opposition &amp; weaponisation of judiciary
9. Provision of critical enablers such as affordable &amp; reliable electricity, fuel, transport (road, rail &amp; air), ICT, water &amp; sanitation, health and education.
10. Confidence – if we put in place the points I raised from 1 – 9, we will ensure that there is confidence.
This is not a walk in the park. This will not happen overnight. If we are not careful, it will take us decades to have our local currency.
Already, we have travelled 27 years with currency crisis since the Black Friday of 14 November 1997!
The challenge I give to the GoZ is to undertake a comprehensive research focused on the need to understand why our currencies are failing &amp; what needs to be done.
This is critical in view of the fact that we have lost many currencies in recent years!
</blockquote>
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

In simple words, an economist named Gift Mugano is warning the government not to rush into banning the use of different currencies in Zimbabwe. He says if they only allow one currency, the government may lose out on tax money because people in the informal sector will keep using the US dollar. Mugano suggests the government should focus on fixing the economy before introducing a new local currency. He lists things that need to be done before a new currency can be successful. Mugano says it will take a long time and a lot of work to have a stable local currency in Zimbabwe.

Rushing To Ban Multi-Currency Regime Could Backfire, Warns Mugano

Former Chivi South MP Killer Zivhu (ZANU PF) has derided the country’s gold-backed currency, the ZiG, claiming it has caused significant problems for Zimbabweans due to its rapid devaluation.
In recent days, social media platforms have been flooded with price stickers from supermarkets, revealing sharp increases in the cost of basic grocery items since the currency’s launch in April 2024.
For example, a 2-litre bottle of cooking oil, initially priced at around ZiG42, now exceeds ZiG70 in some stores, despite the official exchange rate changing by less than ZiG1.
These price hikes suggest that retailers are relying on the street rate, which is reportedly above US$1: ZiG20.
In a post on X, Zivhu mocked the ZiG, comparing it to petrol mixed with ethanol, which some motorists claim is of poor quality and lacks durability. Said Zivhu:
<blockquote>
Pakuda 50kg ye headache tablets kuti ukwanise kushandisa ZIG, ukarega unofa ne BP, ukapinda mu Shop ne ZIG rinopera fast kunge ethanol yatinotengeserwa tichinzi petrol, zvinhu zvacho masaramusi chete. (You need 50kg of headache tablets to be able to use ZIG, if you stop, you’ll die from BP. If you enter the shop with ZIG, it disappears fast like the ethanol sold to motorists as petrol, the stuff is just rubbish)
</blockquote>
Zivhu’s sentiments were backed by an economist, Professor Gift Mugano, who tagged government apologist Mmatigari in his comment. Mmatigari responded:
<blockquote>
So Killer Zivhu is your think tank on currencies? You are disappointing.
</blockquote>
Mugano then said Zivhu’s comments should not be ignored as he is one of the most progressive Zimbabweans”, who lives with the people and is a consumer. Wrote Mugano:
<blockquote>
[Killer Zivhu] is one of the most progressive Zimbabwean I admire. He is real. He lives with the people. He is a consumer. In this particular case of the ZiG, he gave his own experience as a consumer. If you don’t respect him/like him, that is your problem.
Zvenyu zvekungohumana izvo and carry venomous mouth everywhere hazvivaki nyika.
I submitted grounded solutions on what must be done to make ZiG succeed (check my previous posts which I posted in April). What did you do, you led a battalion of vasvasvangi on me. After I noticed that you rejected my well thought advice, I told you that ZiG will not survive.
Here we are. How is the ZiG performing? It’s a dismal performance. Companies are closing and consumers are suffering.
We have gone through 27 years of currency crisis, that is, from 14 November 1997 (the black Friday when the Zimbabwe dollar crashed). Over these years, you haven’t learnt anything as far as the drivers of the currency crisis are concerned?
If not please learn to engage in a constructive and meaningful conversation so that you can learn from experts in the field tichivaka nyika. Zimbabwe is for us all.
There are no designated shops/hospitals for the ruling party supporters nor opposition supporters. We go into the same shops/hospitals tichisvasvangwa ne economy tese.
Learn or perish
</blockquote>
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Killer Zivhu, a former MP, criticized the new ZiG currency in Zimbabwe, saying it is causing prices to go up too quickly. He compared it to bad petrol that disappears fast. An economist named Professor Gift Mugano agreed with Zivhu and said his experience as a consumer should be taken seriously. He also urged people to learn from experts and have constructive conversations about the currency. Many people are unhappy with the ZiG currency and how it is affecting the economy and people's lives.

50kg Of Pills Needed To Cure Headache Caused By ZiG - Killer Zivhu

George Charamba, the Deputy Chief Secretary in the Office of the President and Cabinet (Presidential Communications), said that President Emmerson Mnangagwa has closed the door to any dialogue with opposition leader Nelson Chamisa.
Charamba’s remarks came in response to an appeal by economist Gift Mugano, who had called on Zimbabweans across the political divide to engage in dialogue to resolve the country’s pressing problems. 
Posting on X (formerly Twitter), Mugano argued that Zimbabweans have overcome their challenges in the past when they united. He wrote:
<blockquote>
Fellow Zimbabweans, we have it on record that when we sit down and dialogue as Zimbabweans, we make progress as a country.
Striking examples of what dialogue can do are the talks between ZANU and ZAPU; and ZANU PF and MDC which produced the 1987 Unity Accord and GNU, respectively.
Likewise, we have it on record that when we unite, we move mountains. We united as one people against the Smith Regime and defeated them during our hard-won armed struggle.
Demonstrations will not help us to resolve our differences/challenges. Likewise, crackdown on citizens will not help us to resolve our challenges/differences…
I appeal to our leaders from the business community, churches, civil society, political parties, GOZ, academics, labour, etc to rise to the challenge and provide leadership towards the establishment of an inclusive dialogue aimed at providing permanent solutions to our differences/challenges.
</blockquote>
Doubling down on his rejection of dialogue with opposition Chamisa, Charamba dismissed the prospect, saying the ship has already sailed for dialogue.
Charamba accused Mugano and human rights lawyer Advocate Thabani Mpofu of “misleading” Chamisa, which Charamba claimed ultimately drove the opposition figure into the political “wilderness.” Said Charamba:
<blockquote>
Professor, here is my honest view from inside: Nguva yataida nhaurirano yakapfuura. That’s the truth. Those keen on talks took up the chance and are communicating with the State.
Those who chose to stay out of dialogue because of cheap advice from you naAdvocate Fulcrum, will remain outside the circuit of dialogue.
What you are harvesting are the disutilities of your amateurish political exuberance in the run-up to elections.
You fortified Chamisa on the wrong; today he is the wilderness you created, and you want to sound constructive, reasonable and level-headed.
You are part of the cabal of pseudo-intellectuals who misled the young man. Today you seek to salve your conscience by abortively appearing to re-negotiate for his Second Coming. IT CAN’T!
</blockquote>
Chamisa has been without a political home since January of this year when he abruptly announced that he had quit the Citizens Coalition for Change (CCC) party – the same organisation he had helped form in 2022 – alleging that it had been infiltrated by the ruling ZANU PF party.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

President Mnangagwa doesn't want to talk to Chamisa. Some people want everyone to talk and work together to fix problems. But Mnangagwa says it's too late for that. He thinks Chamisa's supporters gave him bad advice. Chamisa left his political party because he thought it was controlled by the ruling party. Chamisa doesn't have a political home right now.

Mnangagwa Shuts Door On Dialogue With Chamisa, Says Charamba

Following President Emmerson Mnangagwa’s remarks on Thursday, July, stating that the ZiG would become the sole legal tender before 2030, economist Gift Mugano offered his perspective.
Mugano stated that the government must first establish the minimum requirement for the new currency to succeed before implementing such a policy.
He also advised that policymakers should not introduce new policies on a whim, but rather listen to the needs of the market and strive to develop evidence-based, market-driven policies. Wrote Mugano:
<blockquote>
<h2>On President Emmerson Mnangagwa’s Statement Regarding the Introduction of Monocurrency (i.e., ban of USD):</h2>
This week, President Mnangagwa announced that he will soon introduce ZiG as a monocurrency (i.e., in less than 2 years) if he is satisfied that ZiG is now circulating across the whole country.
Well on time before President Mnangagwa pronounces policy decision to ban the use of the USD, I thought that it is wiser that I capitalise on the President’s open-door policy [George Charamba, the Deputy Chief Secretary in the Office of the President and Cabinet (Presidential Communications)]and share with him my humble views on critical considerations which must be taken into account before introducing a new currency or mono-currency:
1) GOZ must develop a culture of seeing through its policies to the expiration date before making conflicting statements. For example, the pronouncements by the President that he will soon introduce ZiG as a monocurrency is in direct contradiction with the SI 218 of 2023 which extended the use of the multiple currency system to December 2030. This President’s statement, him being the AUTHORITY, will put markets into disarray and will see banks cutting back on USD lending – this will come with massive negative consequences on the economy. In the same vein, some banks with long-term loans in USD will start counting their losses – this will erode trust in government policies and confidence levels.
2) The introduction of a local currency requires basic minimum requirements such as current account surplus, fiscal consolidation (we have to reduce our debt significantly to regions averaging 30% of GDP); a highly productive economy; single-digit inflation and stable exchange rates. In reality, it is very difficult to attain all these conditions at once. However, we must strive to build a productive and competitive economy. I would like to argue that the best way to back our currency is to back it with production. We need disruptive structural policies, that is, industrial policy, agricultural policy, trade policy and energy policy &amp; energy master plan. These policies must be anchored on twin objectives, that is, import substitution and export drive.
3. The informal sector has always been and will always be a hindrance to government policies. The informal sector runs its affairs based on informal rules, not government policies. In its current state, GOZ has no capacity to rein in the informal business. We must formalise the informal sector. The best way to formalise the informal sector is to build a productive economy (see (2)) which will see some sections of the informal sector such as vending and boot economy disappearing as people move into the formal sector/secures formal jobs. Again, with a productive economy, genuine small businesses/informal sectors will remain such as distributors and, through market linkages, will be formalised. In short, we must grow the formal sector.
4. We need to build confidence. Confidence building requires critical actors such as banks and GOZ to walk the talk. Banks, for example, must provide sound banking products at affordable costs/reduce bank charges drastically. The main source of income for banks must be interest rate not bank charges! GOZ must develop evidence-based &amp; demand-driven, credible and predictable policies. Most importantly, it is my humble view that GOZ must undertake nationwide consultations which will lead to a national dialogue on currency crisis and possible remedies. The output of this dialogue should be a de-dollarisation roadmap which is built on the realities facing the country and national consensus.
When introducing a new currency or addressing the currency crisis, it is my humble view that we must be more pragmatic and inclusive in our approach. The fact of the matter is that our country has been held back by currency crisis for close to 27 years, that is, from 14 November 1997 to date and there is no sign of it ending any time soon. This means that we need to do things differently hence my foregoing submission.
As I end my submission, I would like to remind President Mnangagwa of critical events regarding currency matters in Zimbabwe:
1) In February 2009, GOZ adopted the USD as the main currency. The market dumped ZWD and introduced USD. The USD was not introduced by Patrick Chinamasa as he always claims. He was the acting Minister of Finance – he was forced by the market to adopt the USD. Here is the evidence, Chinamasa’s budget of 2009 was in quintillions of ZWD, not USD.
2) My good brother, Honourable Mthuli Ncube introduced monocurrency on 24 June 2019. On the same date, I was the first guest at StarFM on Linda Muriro on Monday and I underscored that we will return to USD in March 2020. I made repeated claims on StarFM on subsequent programmes of Linda Muriro on Monday. It came to pass. In March 2020, we went back to USD. I am raising this precedence so that we can draw lessons from history.
<h2>Lessons:</h2>
1) We must establish the minimum requirement for the introduction of the new currency if we want our currency to succeed (see my submission above).
2) When it comes to economics, the market is the best constitutional court on any economic matter. Policymakers must always listen to the needs of the market and must always endeavour to develop evidence-based and market-driven policies.
Yours Truly,
Professor Gift Mugano (Ph.D)
</blockquote>
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Economist Gift Mugano Weighs In On Mnangagwa's ZiG Currency Plans

Zimbabwean academic, financial analyst, and economist, Gift Mugano, has warned that goods will disappear from supermarket shelves after the government introduced rules making it mandatory for businesses to use the fixed exchange rate.
On Thursday, 09 May, the Minister of Finance, Economic Development and Investment Promotion, Mthuli Ncube, gazetted Statutory Instrument 81A of 2024 which penalises individuals and companies charging prices above the prevailing official foreign exchange rate.
The official exchange rate in the economy is set daily by the Reserve Bank of Zimbabwe (RBZ).
Offending firms and individuals will be fined ZiG200 000, but if the foreign currency taken in is higher in value, then the penalty equals that foreign currency.
Furthermore, the 10 per cent premium that retailers were allowed on the official exchange rates between foreign currency and the ZiG has now been abolished.
Responding to the developments, Mugano said Statutory Instrument 81A of 2024 “will definitely kill the formal businesses”. He wrote on X (formerly Twitter):
<blockquote>
The New Amendments to the Exchange Control is a total disaster!
Goods will disappear from the formal sector and appear in the informal sector! Unfortunately, GOZ can’t regulate or enforce compliance in the informal sector because it’s gigantic &amp; stubborn.
This gives the informal sector latitude to set own informal rules and disregard government policies/regulations.
The informal sector has the flexibility to operate at competitive exchange rates/black market rates which will definitely kill the formal businesses.
The irony is that we have been on this road before and it didn’t work! GOZ must develop a culture of carrying out impact assessments of its policies and come up with improved policies.
The informal sector is a menace and fluid – we must apply critical thinking not emotions if we are to redirect the economy on the right path.
In my previous instalments, I proffered solutions which GOZ must consider to save the ZiG but authorities ignored the advice.
It is high time that we undertake a comprehensive assessment of the root causes of our economic problems. We must never be prescriptive.
At the moment I humbly suggest that authorities stop issuing press statements and statutory instruments because it is not taking us anywhere.
Let us undertake a 360-degree investigation of our economic crisis and come up with comprehensive solutions which must include political remedies!
Otherwise, we are going nowhere.
</blockquote>
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Penalising Companies For Charging Prices Above Official Forex Rate Will Kill Formal Businesses - Mugano

Economics professor Gift Mugano has reiterated his assertion that Zimbabwe’s new currency, ZiG, will fail in response to criticism from ZANU PF spokesperson Christopher Mutsvangwa. Below is Prof Mugano’s statement in full:
<blockquote>
<h2>UNPACKING WHY THE NEW CURRENCY (ZIG) WILL FAIL</h2>
[On Monday], Honourable Mutsvangwa held a press conference and as usual, he went on a rampage calling me all sorts of names because I raised reservations about the new currency [Zimbabwe Gold (ZiG)].
I thought that it is fair that I provide a breakdown of the reasons why the ZiG will fail. The ZiG will not be killed by Gift Mugano’s negativity as Amb Mutsvangwa would like to insinuate but by massive policy missteps mainly by the Reserve Bank of Zimbabwe and Treasury as well as the absence of structural policies.
<h2>1. Reducing interest rate from 130% (i.e., 10.8%/month) to 20% (i.e., 1.67%/month)</h2>
One can be forgiven for thinking that the RBZ is assuming that by backing the ZiG with gold and cutting the zeros, the ZiG is in the same league with gold and USD, hence the decision to bring down annual interest rates to 20%. The reality is that ZiG is as good as ZWL and the economic environment has remained the same, that is:
a) Volatile exchange rate – the black-market exchange rate has continued to run away – we hear that it is now trading at ZiG20 (the equivalent of ZWL$50,000) against USD;
b) Inflation remains high;
c) Our disposable incomes and aggregate demand have not increased because the zeros were cut;
d) Dwindling foreign currency supply caused by the double tragedy of declining export receipts (as a result of falling commodity prices) and draining of foreign currency as a result of food imports caused by drought.
It is my humble view that RBZ’s decision to lower interest rates is a serious policy misfiring that comes with massive consequences:
(a) Unproductive lending – any rational bank would institute measures aimed at defending its asset base from shrinking. Investment in housing development and properties stands out as the most attractive investment option. In circumstances like these, there are high chances that fewer resources will be channelled towards the productive sector. This will militate against the survival of the ZiG. Strong currencies are backed up by production – resulting in fewer imports and an increase in exports;
(b) Speculative borrowing – without contradicting with (a), for “obvious reasons” the banks will still lend the productive albeit it will be reasonably lower than in previous years. However, anyone who pounces his/her hand on this cheap money will run to the parallel market and buy forex and service the loan by capitalizing on the exchange rate spiral whilst making massive profits in the process.
<h2>2. Financing of the 25% export retentions</h2>
The RBZ will retain 25% of the exports and is supposed to credit the account of the exporter with ZiG at the prevailing rates. In subsequent points below, I logically derive the problem:
(a) If we take an average annual export receipt of US$7.5 billion, it follows that the 25% export retention is US$1.875 billion. This amount must be converted into ZiG;
(b) The Governor indicated that the total reserve money balances are around ZWL$2.6 trillion, that is, around US$80 million;
(c) The question which arises is where is the Governor going to get the money to pay for the US$1.875 billion (i.e., US$156m per month) when the ZiG equivalent in the entire banking sector amounts to US$80 million, that is, half of the monthly export retention requirement?
(d) In this puzzle, it is my humble view that there is no scope to give exporters financial instruments such as Treasury Bills (TBs) because exporters are already under dire stress as a result of falling commodity prices. The Governor will be forced to print money to fund the forex retained from exporters (i.e., US$156m per month) and destabilise the rate in the process.
<h2>3. Export retention and non-disbursement of auction funds saga</h2>
On 8 April 2024, the Governor issued Exchange control directive RZ56/2024 which declared that:
(a) Outstanding auction allotment areas which have been accumulated by the RBZ for several weeks will be converted into a 2 – year ZiG denominated investment (TBs) at the prevailing exchange rate and will earn an annual interest rate of 7.5%;
(b) All outstanding payments for the foreign currency purchased by Treasury under the 25% surrender requirement will be converted into 1 – year ZiG denominated investments (TBs) at the prevailing exchange rate and will earn an annual interest rate of 7.5%;
This is a saga and an unprecedented move by the apex bank. It introduced the auction system and businesses participated in it with the faith that everything was under control only to realise later that they could not get back their monies.
<h2>THIS IS NOT RIGHT.</h2>
This has massive implications for businesses from different angles:
(a) This is a direct violation of property rights which is synonymous with appropriation of business monies. This is tragic. It raises despondency and worsens the trust and confidence levels which are required to foster the acceptability of the ZiG;
(b) These funds are obviously part of the working capital of the affected businesses. This means that a number of companies are under serious stress – their ongoing concern is threatened. @ReserveBankZIM 
this is WRONG.
(c) The Governor categorically made it clear that these outstanding balances will be converted at the prevailing exchange rate of USD/ZiG, that is, at ZiG13.56 (i.e., ZWL$33,882.72) to USD yet some of these balances were held by the central bank when the rate was ZWL$6,000 (as at December 2023), that is, ZiG2.4. This effectively means that on 8 April 2024, when the directive was issued by the esteemed Governor, capital of businesses was eroded by the Governor’s directive by more than 6 times – business working capital is gone before we factor in further erosions which will be caused by inflation and exchange rate volatility in the next 2 years. For starters, the 7.5% interest rate stipulated for these funds is a mere joke to say the least. At the end of the tenure of these instruments, the value of these monies will be nothing (zuda chairo). If I was sitting on the boards of these affected companies, I would ask them to write off this debt and count their losses.
<h2>4. Decision to Convert Excess ZiG Balances into Non-Negotiable Instruments</h2>
The Governor’s decision to convert the excess liquidity held by banks to non-interest-bearing non-negotiable certificates of deposits (NNCDs) with a view to mop excess liquidity will entrench dollarisation and kill ZiG.
This policy directive is coming into effect against the background of the fact that the bank balances of the ZiG and USD stand at ZWL$2.6 trillion (equivalent to US$80 million) and US$2.4 billion, respectively.
Instead of the Governor promoting the use of ZiG by encouraging lending towards the productive sector, he is mopping the little ZiGs leaving the USD balances dominating the banking sector. In this process, he is effectively promoting the USD and killing ZiG
<h2>5. Continuation of the Gold – Token (ZiG)</h2>
The question which is boggling the minds of many is how are the gold tokens going to be funded considering the fact that RBZ is still issuing the tokens and the cumulating sales of the gold tokens are approaching 1000kgs, that is, one (1) tonne of gold? Is this one tonne of gold part of the 2.6 tonnes of gold which is backing the ZWL$2,6 trillion?
The RBZ must come out clean on this as this is killing the little confidence remaining.
<h2>6. Excess Liquidity from Treasury</h2>
The funding model used by Treasury to pay for infrastructure development is very problematic and is anti-ZiG. As long as the Treasury pays contractors with ZiG, the exchange rate will continue to run away as these ZiGs are offloaded on the black market. It is as simple as that.
Instead of GOZ sending the police after the money changers, the Treasury must close its tape. The police and other arms of govt have no capacity to arrest the actors in the black market – can’t arrest 7 million people in the informal sector.
On a separate note, isn’t it that the GOZ is exposing itself by setting the police on money changers? If GOZ has enough gold and foreign currency reserves, why is it going after money changers, after all, there is tight liquidity.
<h2>7. Confidence</h2>
As a country, for the last 26 years (i.e., from 14 November 1997) we lost several currencies (ZWD, USD, Bond note, RTGSs, ZWL, etc) and in the process we suffered massive losses in respect of jobs, savings, pensions, capital, medical aid, etc. Life has become unbearable. We suffered enough. As they say, once beaten twice shy, we are not taking any chances.
Citizens’ and businesses’ trust in a currency is driven by the government of the day – if GOZ refuses the ZiG, how can it expect us to accept the same currency?
The Governor’s BIGGEST MISTAKE was to declare that he would not force ZiG on fuel stations.
His blunder was complimented by Treasury’s reluctance to accept ZiG in respect of government services (such as passports) &amp; payment of duties, taxes, fees and levies. GOZ should have simply enforced the use of a multi-currency regime in all its services and payment of duties, taxes, fees and levies. As it stands, ZiG is an orphan which has been rejected by its biological parents (GOZ).
If the biological parents of ZiG are refusing to take care of their own child ZiG, what motivates us (citizens) to parent this orphan? Honestly, what concerns a bird with a toothpick if it has no teeth?
Still on confidence, the biggest undoing of the Governor was bad-mouthing his predecessor (ref quasi-fiscal financing and “entertaining complaints”) and his failure to avail the ZiG notes on time and exposed the public to unfair pricing caused by lack of change.
If it is true that @DrJPMangudya was giving in to pressures from GOZ, what makes him think that we will trust his “not under my watch” mantra will pass the test of time at @ReserveBankZIM?
This, together with the cessation of payment platforms which negatively affected the general public to transact, worsened the confidence level – people are angry. This situation is worsened by the fact that there were no extensive consultations which were carried out by the RBZ.
The issue of currency sensitivity was no longer an issue because President @edmnangagwa had already indicated that his government was going to introduce a structured currency.
He gave policy direction, right? At that point, RBZ should have hit the ground and held stakeholder consultations across the country (town hall meetings, community meetings, dialogue with businesses and technocrats).
These consultations were supposed to be heart-to-heart consultations because they were supposed to be built on the understanding of the pain which citizens and businesses went through as a result of the currency crisis.
Most importantly, RBZ was supposed to listen to everyone’s fears, and concerns and give them assurances. These assurances must be reflected in GOZ policies.
As it stands, the RBZ ambushed us and they want us to run with the ZiG when we have so many fears and have not cared to talk to us and build consensus so that we walk this ZiG journey together.
<h2>8. Absence of robust structural policies</h2>
The ZiG must be anchored by production. Structural policies such as industrial, agricultural and trade policies must be recalibrated with a view to building a productive, exporting and prosperous economy. We spend over US$4 billion annually importing commodities which we can produce locally produced: cereals, fruits and vegetables, soyabean, wheat, toothpicks, chewing gums, pampers, tissue and paper, etc.
This tells us that we need to relook at our policies with a specific focus on substitute imports. Likewise, the fact that 92% of our exports are constituted by commodities [minerals (70%) and agricultural products (22%)], tells us that we need to recalibrate our industrial and export policies with a view to changing our exports towards diversified and value-added exports.
It is on the basis of the foregoing submissions that I have serious reservations about the success of ZiG.
Those who are close to Cde Mutsvangwa please tell him that I am humbly asking him and his party to allow me to enjoy the fruits of our independence by allowing me to exercise my constitutional rights – freedom of expression.
In the same token, please tell him that I am just a humble guy from Chimanimani who has one goal – dying to see a prosperous Zimbabwe and my approach is centred on providing independent and incorruptible comments on fault lines in our policies so that GOZ can consider them for policy improvements.
</blockquote>
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Unpacking Why ZiG Will Fail - Gift Mugano

Finance Minister Mthuli Ncube has been urged to promptly present fiscal measures that complement the monetary policy announced by Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu last week.
The 2024 Monetary Policy Statement outlines key strategies and measures aimed at achieving currency stability. These include the introduction of a structured currency called ZiG, backed by reserves and royalties.
Economist Gift Mugano suggests that Minister Ncube should not delay presenting his mid-term budget review in July or exclusively favour the use of USD over ZiG. He said:
<blockquote>
The Minister of Finance must address the following:
1. Directing all local payments by the GOZ to be in ZiG;
2. Directing all duties, taxes, levies and fees including government services such as passports, birth certificates, death certificates, etc to be in ZiG;
3. Directing fuel stations to accept both ZiG and USD – this must enforced in line with the spirit of the use of a multi-currency regime;
4. Recalibrating the financing model for the public infrastructure with a view to moving away from using cash to long-term finance e.g., diaspora bonds;
5. Setting aside a budget for the liquidation of the 25% export retention surrender requirement view a view to stop the RBZ from printing money;
6. Present a new budget statement in ZiG – this budget must include a supplementary budget with a view to accommodate the exchange movements as the current has been eroded by exchange rate upheavals. This submission is grounded on the fact that the fact that the exchange rate shot from ZWL$6,000/US$1 when the 2024 budget was presented to ZWL$33,882.72 as of 5 April 2024.
7. Downward review of taxes and elimination of some tax heads such as the sugar tax – the current tax regime is causing inflation in USD which means that inflation in ZiG will be massive.
</blockquote>
The annual inflation rate in Zimbabwe has recently risen, reaching an over-one-year high of 55.3% in March 2024. This increase follows a rate of 47.6% in February.
The depreciation of the now-discarded Zimbabwe dollar played a role in this surge. Since the beginning of the year, the Zimbabwe dollar experienced a decline of more than 70% against the US dollar before being replaced by ZiG last week.
The introduction of ZiG marks Zimbabwe’s sixth attempt at creating a new currency since 2008.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Mthuli Ncube Urged To Present Fiscal Measures To Complement Monetary Policy

Zimbabwe’s newly-introduced structured currency, known as ZiG, short for Zimbabwe Gold, failed before it was even launched, an economic commentator has said.
Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu on Friday, April 05, announced the introduction of ZiG, which replaced the worthless Zimbabwe dollar.
However, economist Gift Mugano said the new currency failed before it was launched mainly because it was not backed by sufficient reserves.
Mugano said the genesis of Zimbabwe’s currency crisis started on 14 November 1997 when the ZW$ crashed – the Black Friday.
Since then, the ZANU PF-led Government moved from the Zimbabwe dollar (the currency adopted at independence in 1980) to USD (in 2009), Bond (in 2016), RTGS (2019 – February), ZWL$ (2019 – June), back to USD in 2020 and now to ZiG, although the latter is part of a multi-currency system. Said Mugano:
<blockquote>
At each and every point when these currencies were introduced, we witnessed massive disagreements clearly drawn on political lines and serious disregard for the experts’ views.
Like now, we are telling you that ZiG will fail dismally and you are busy defending a currency which was dead before it was announced.
So, we haven’t learnt anything in the last +26 years of the currency crisis?
</blockquote>
One Nyasha Musandu said the introduction of ZiG will not succeed as the Government lacks sincerity. She wrote on X:
<blockquote>
It worries me how many people actually think the government is being sincere with this ZiG thing. I see so much analysis and justification, and I just think to myself, we have been here before so many times. What are we failing to learn?
</blockquote>
Meanwhile, in a post on X, Mugano outlines seven factors which he believes will undermine ZiG namely (1) a large informal sector (+80% of the economy); (2) drought of confidence; (3) drought of production; (4) printing of money &amp; excessive liquidity caused by treasury; (5) lack of national cohesion and consensus; (6) lack of policy clarity; and (7) external shocks (drought &amp; subdued commodity prices). He added:
<blockquote>
The MPS presented by the new Governor today reminds me of the MPS which was presented by Dr JP Mangudya on 20 February 2019 where the later introduced the RTGS as the new currency with a starting exchange rate of ZW$2.5: US$1 (interbank rate/market).
Immediately, the exchange rate started to run away and today the ZW was trading at ZWL$40,000: US$1.
This is exactly what is going to happen to ZiG!
Over and above the 7 points raised above, the existence of the USD in the market (although unavoidable), is the worst enemy of ZiG. ZiG can’t compete with the USD in the market. 
As long as ZiG is not accepted/used exclusively at fuel stations, passport offices, ZIMRA (payment of duties &amp; taxes), schools, tuckshops, etc then forget about ZiG.
Most importantly, if individuals/anyone can’t walk into a bank and buy /sell foreign currency the same way they do in the informal market/black market at an attractive rate, then forget about ZiG.
Another serious threat to ZiG which requires special attention is excessive liquidity from the Ministry of Finance going towards payment of contractors &amp; civil servants salaries. The approved 2024 budget stood at ZWL$58.2 trillion albeit it is eroded by inflation &amp; exchange rate spiral.
The RBZ in its MPS presentation, placed emphasis on the fact that the total reserves in its coffers amount to US$285 million are more than 3 times the current reserve money, i.e., ZW$2.6 trillion (equivalent of US$90 million). This is a correct assessment.
However, the RBZ is obviously not factoring in the impact of the excessive liquidity from the Treasury. Obviously, with the exchange rate movement which has seen the official exchange rate slipping from ZWL$6K from the day when the 2024 budget was launched to ZWL$25K as of this week, it means that our budget shrunk by more than 4 times in 3 months.
The converse is true – it is implied that the budget has moved from ZW$58.2 trillion by four (4) times – so we may be talking of a realistic budget of ZWL$240 trillion.
The question which arises is that when RBZ is presenting its MPS, isn’t prudent that it must also raise a point of advice to the Treasury (as an advisor to GOZ) on the possible implications of liquidity on the exchange rate.
Likewise, isn’t it fair to request the RBZ to give us a balanced assessment of the impact of reserve money &amp; excess liquidity from the treasury on the exchange rate rather than concentrate on the reserve money supply only?
I would like to argue that the national budget has always been and will always be the biggest threat to the exchange rate stability – more than money supply.
The question which arises again is whether the US$285 million is enough to cover USD demand (demand for value preservation) from civil servants &amp; contractors. The answer is a big no!
ZiG = bond note = ZWL = RTGS = FAILURE
</blockquote>
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

"ZiG Failed Before It Was Launched"

Economist Gift Mugano remains steadfast in his assertion that the gold held by the Reserve Bank of Zimbabwe (RBZ) is inadequate to support the newly introduced structured currency, ZiG, even in light of anticipated forex inflows from exports, diaspora remittances, and credit, among other sources.
Governor John Mushayavanhu, on Thursday, April 4th, stated that the country possesses 2.5 tonnes of gold and substantial cash reserves to anchor ZiG. However, during a subsequent address to journalists in Harare on Friday, Mushayavanhu clarified that ZiG’s foundation rests on a composite basket of reserves, including foreign currency and precious metals stored in the central bank’s vaults.
Despite this, Mushayavanhu criticized economic commentators who, via social media, expressed doubts about the sufficiency of gold reserves to bolster ZiG. Said Mushayavanhu:
<blockquote>
ZiG shall at all times be anchored and fully backed by a composite basket of reserves comprising foreign currency, and precious metals mainly gold received by the reserve bank as part of in-kind royalties and kept in the vaults of the bank.
Foreign currency balances will be accommodated through market purchases from the 25 per cent surrender as well as the sale of some precious metals that may not have been received in the form of gold, for example, platinum.
As of today, the 5th of April 2024, the Reserve Bank’s reserve asset holdings comprise plus or minus 100 million US dollars in Nostro balances. This is the foreign exchange that we already hold.
We also have 2,522 kilogrammes of gold worth US$185 million of which one tonne of that gold is held offshore and the balance is onshore.
Those of you who were here yesterday would have seen that out of the need for transparency, and also for me to confirm to His Excellency that I have taken over what Dr [John] Mangudya left in the central bank, we opened the vaults of the central bank and you were able to see the gold that we are holding.
I saw that on social media some of you were saying, “Oh, you have 2.5 tonnes of gold”, you were converting it and coming up with a number and converting it to import cover.
And then I said to myself, “Are these people real economic analysts? Don’t they know that Zimbabwe is 80% to 85% dollarised?”
Therefore, we already have 85% of the money circulating in this country as foreign exchange, before we even factor what is going to be converted to ZiG.
</blockquote>
Below is Mugano’s full response to Mushayavanhu:
<blockquote>
I still insist that the US$285m is a drop in the ocean. I listened to the Governor’s response with much respect. However, I would like to argue my case as follows:
The submission by the Governor narrowly focuses on the view that the economy is dollarised. Yes, from a definition point of view, the economy is dollarised. 
However, the fact of the matter is that the statistics we are using as indicators of dollarisation such as total deposits in the bank in USD vs ZWL and loans in USD/ZW (which is +96% in USD in terms of loans) are not a correct yardstick of the intensity of dollarisation because the informal sector is not banked – only 20% of the economy is banked.
</blockquote>
In addition, credit to the private sector as a share of GDP is merely 8.8%. In essence, 96% of 8.8% of the economy is the total loans in USD which have been given out by banks. This is a small share of the total currency in circulation. Hence, using the USD/ZW loan ratio is somehow misleading.
<blockquote>
For argument’s sake, if the economy is +96% dollarised, why was the rate running away in recent weeks? Is the chaos in the foreign exchange market caused by 4% of ZWL? The answer is a big no.
Alternatively, are we saying that the national budget which runs into tens of trillions of ZWL plus private sector own budgets in ZWL constitutes 4% of total cash in circulation? No.
I believe there is a significant share of ZWL in circulation, which may be in the region of 30% of the total currency in circulation due to the budget factor. 
There is so much excessive liquidity which is being pumped into the market by the Treasury through payment of contractors and civil servants. In addition, the private sector also makes payments in ZWL (e.g., for salaries &amp; services/goods)
The recipients of the ZWL payments dump the ZWL on the black market to preserve their earnings or secure the USD which is required at passports, fuel stations, ZIMRA, tuckshops, schools, etc. This trend will continue as long as ZiG is not accepted at passport offices, fuel stations, ZIMRA, tuckshops, schools, etc.
In addition, in his MPS which he presented today, the Governor emphasised that the RBZ has more than 3 times reserves to cover the reserve money supply which is ZW$2.6 trillion (equivalent to US$90 million). 
He was obviously trying to assure the market that there were enough reserves to meet forex demand. However, his submission is narrowly focusing on money supply as the main driver of the exchange rate volatility which is wrong.
Excessive liquidity coming from the budget is the major destabilising factor of the exchange rate instability in Zimbabwe.
Again, for argument’s sake, is our Governor by any chance insinuating that the runaway exchange rate witnessed in the last few weeks is the ZW$2.6 trillion? I would like to argue that the disbursements from the ZW$58.2 trillion budget are a big factor.
Again, the question which arises is whether the US$285m is enough to guarantee demand for forex, that is, for both import and value preservation. The answer is a big no.
What I am sure of is that in the coming few days, the Governor will understand that beyond managing money supply, he must worry about excess liquidity from the Treasury. Verily, verily, he will appreciate that I am a real economic analyst.
Let me end by asserting that if the budget is in USD, my view that we need at least 6 months on import cover would be invalid.
In view of the fact that the budget is in ZWL, we need at least US$4.5 billion in reserves so that anyone who walks in the bank can change money the same way we do in the black market.
Crazy as it may look, it is the only way to kill the black market and restore confidence. Liberalising the exchange rate without allowing people &amp; anyone who wants USD to access it from the formal banks, will not guarantee the success of ZiG. In addition, ZiG must be exclusively used at passport offices, fuel stations, ZIMRA, tuckshops, schools, etc.
It is my prayer that the Governor will have an open door policy like his predecessor @DrJPMangudya so that we continue the dialogue.
Ndaedza kutaura semunhu mukuru kuti tivake nyika yedu. Nyaya yemari chokwadi yanesa. Tave kufanirwa kuikunda hondo yekuti mari ive nesimba.
Hatingaiti mari inochinja chinja kakawanda gore risati rapera hazviendesi nyika mberi kana kukurudzira vaya vanoda kuita ma investments muno. Saka ngative nemweya wakanaka wekuonesana murugare.
Ndatoona Governor vakutotanga nekuda kubatwa nemweya we social media kuda kutinyomba haiwa hazvinzwarwo ivo ndiGovernor hofisi yavo haubvumiri izvozvo ngavasashoropodza maprofession edu asi vatambe nenyaya iri mudariro chete.
Pamwe chokwadi vanogona kunga vari right pakuti mari iri mudura rayo inokwana. Hazvina kuipa vanongotiudza murungare ndokuti nyika ivakike. Hakuna muziva zvose.
Isu mapurofesa chedu kubvonga chete anodyawo wadya kushata kana nhapitapi vachadudzira ivoooo sekuimba kwakaita Baba Shero @alickmacheso3.
Kunyangwe hedu tichifanirwa kuudzana murugare, hofisi yedu yakati sunungukei kuti titambanuke (flexibility) pakutaura kwedu kupfuura Governor wedu.
</blockquote>
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Mushayavanhu, Mugano Clash Over ZiG & RBZ Gold Reserves

In an apparent response to Government spokesperson Nick Mangwana, who accused unnamed individuals of undermining Zimbabwe’s currency and sabotaging efforts to stabilize the economy, economist Professor Gift Mugano suggested that it is the government’s actions that undermine the Zim dollar.
Posting on X, Mangwana, who serves as the permanent secretary of the Ministry of Information, Publicity, and Broadcasting Services, stated that some citizens are on a “crusade” to undermine all government efforts aimed at stabilizing the economy. <a href="https://x.com/nickmangwana/status/1775499882066833542?s=20">He said</a>:
<blockquote>
Why would anyone doggedly make it their mission to fight Zimbabwe’s currency? Why would they turn themselves into a crusader in an effort to sabotage all the endeavours to stabilize things in Zimbabwe? Rank Treachery.
</blockquote>
In a separate post, Mugano asserted that excessive printing of money and the unresolved confidence crisis emanating from actions of monetary authorities are among the enemies of the Zimbabwe dollar and the yet-to-be-introduced structured currency. <a href="https://x.com/gift_mugano/status/1775597088241328624?s=20">He said</a>:
<blockquote>
The enemies of our currency &amp; the so-called structured currency are:
1. Excessive printing of money &amp; excess liquidity caused by command agriculture; wrong financing model on roads &amp; key infrastructures;
2. A dominant informal sector which is governed by informal rules &amp; has no regard for govt policies – the informal sector has its own governor, mattress bank, minister of finance, etc
3. devastating drought &amp; subdued commodity prices which have a combined effect of reducing the availability of USD liquidity
4. unresolved confidence crisis caused by loss of capital/pensions/savings/insurance/investments as a result of incessant currency collapse &amp; currency crisis
5. lack of policy clarity – our economic problem is centred around structural rigidities which require structural policies (industrial, trade and agricultural policies). We haven’t seen much activities &amp; media coverage on these policies in the same way we have seen visibility &amp; pronouncements on monetary &amp; fiscal policies. In short, our structural policies are not up to scratch.
6. drought of production – the best way to defend our currency is to institute policy measures and conditions that promote a productive economy (e.g., sound structural policies, working markets, market-led economy, sound financial sector, stable political environment powered by rule of law, constitutionalism and strong institutions).
7. Broken politics – we have invested so much energy in disunity &amp; hate speech instead of fostering peace, unity, tolerance and love. We are allergic to national dialogue, social contracts, divergent views, etc. Ironically, we expect to see flawless implementation of public policies and attainment of the desired economic goals when we are divided.
Structured currency = bond note, gold coins/gold token/ZiG. Bond note &amp; ZiG were/are local currencies backed by USD &amp; gold, respectively but failed dismally because of the reasons I mentioned above.
This is why I am convinced that a local currency or structured currency will always fail as long as the factors raised above are not adequately addressed.
</blockquote>
Businessman Kuda Musasiwa characterised the structured currency as a “mubobobo” currency, referring to a traditional medicine acquired by men that allegedly enables them to rape women without any physical contact. He wrote:
<blockquote>
I have never physically touched a $50 note in Zimbabwe. I’ve seen it on Twitter. I ain’t never seen a real gold coin from RBZ. I saw it on Twitter.
Not even when I jumped on a combi from Hatcliffe to Helensvale did I see anyone pay in a local note? I’m in tech and I have NEVER experienced a ZiG.
I tell you NOT one lie, PaDust in Hatcliffe, when we pick up our daily cash from the ladies who horder from the Fresh Farm every morning, not ONE has offered to pay in ZWLs in the whole of 2024 and we are now 4 months in.
I can admit that sometimes in the Trade centre some guys will offer to “swipe” for me when shopping … Offering a better “rate”. But my maths is bad and can’t be fucked most of the time to even bother.
Don’t even know how they work. 🤣These are fictional currencies. Like the one coming. How are our leaders so out of touch?
Mubobobo currencies.
</blockquote>
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Enemies Of Zimbabwe Dollar, Structured Currency - Prof Mugano

Economist Professor Gift Mugano has broken his self-imposed silence on Zimbabwean economic matters, and this time he dismisses the government’s proposed “structured currency” as merely a revival of previously unsuccessful initiatives.
In January this year, Mugano said he would no longer comment on Zimbabwean economic matters after he was repeatedly labelled an “anti-economic progress” person by ZANU PF.
However, in an interview with <a href="https://www.newzimbabwe.com/nothing-new-here-economic-problems-will-persist-expert-slams-introduction-of-new-structured-currency/">NewZimbabwe.com</a>, Mugano pointed out several fundamental weaknesses of the government.
In response to inquiries about whether the structured currency could mitigate the currency crisis, Mugano emphatically rejected the idea, asserting that the new currency would not contribute to stability.
Mugano underscored the shortcomings of past endeavours, including gold coins, gold tokens, and the bond note supported by the African Export–Import Bank (Afreximbank). He said:
<blockquote>
Does the structured currency help us to address the currency crisis, the answer is no, and that is the V11.
Why didn’t these gold coins, gold tokens succeed in guaranteeing stability? Then why is a bond note that is backed by AFRI-EXZIM bank failed to guarantee 1:1?
So there is nothing new about what they are talking about, they are just regurgitating the same things they are doing vocabulary nice terms but in reality that is just nothing.
They are not going to be launching anything new, the problems are going to continue full stop.
</blockquote>
Mugano asserted that the solution to Zimbabwe’s currency crisis is increased production, investments and savings. He said:
We have solutions there are measures, the first thing which we need to address is that a currency is dependent on production, so if you don’t produce as a country you can’t defend the currency.
<blockquote>
So the strength of the currency in any country is a reflection of the country’s production capacity, so the big elephant now is what do we need to do to raise production, we need savings and investments because the savings are identical to savings.
So then the second question is why do you need to have savings? If you are not saving you have no money you can’t create creation, in 1996 the savings GDP ratio was 25 per cent right now we are in negative 11% because the people are not saving money, right?
</blockquote>
Online publication, The Newshawks, reported the new currency will likely be launched by outgoing Reserve Bank governor John Mangudya this Friday.
Mangudya was officially replaced by John Mushavanhu who officially took over last week.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Structured Currency Will Not Address Currency Crisis - Mugano

Economist Professor <a href="https://pindula.co.zw/Gift_Mugano">Gift Mugano</a> says he will no longer comment on Zimbabwean economic matters after he was repeatedly labelled an “anti-economic progress” person by ZANU PF.
Posting on X, Mugano said he watched three Press conferences by ZANU PF “including the one which was done today (Friday)” and noted that the party’s spokesperson, Christopher Mutsvangwa, expressed the ruling party’s frustration on his economic commentaries.
Mutsvangwa said rather than writing articles “day in and day out about the malaise of the Zimbabwe economy”, Mugano, whom he referred to as a desktop economist, should visit lithium mines in the country and the Dinson Iron and Steel plant at Manhize to appreciate the economic strides the country is making.
Mugano said it was not worth commenting on economic issues in Zimbabwe given that his views had angered ZANU PF. <a href="https://x.com/gift_mugano/status/1745908935951827057?s=20">He wrote</a>:
<blockquote>
A presser by ZANU PF that is, the ruling or governing party cannot be taken lightly. It is serious business.
Obviously, at such critical platforms where the governing party engages with the public and as part of its statement, it spends several minutes sharing with the world its frustration with a harmless guy from Chimanimani and calls him all sorts of names with so much anger, one has to reflect if it is worth to continue commenting on matters relating to economic issues of our beloved country.
Based on these facts, I would like to categorically make it clear that from this moment and onwards, I will not comment on any economic matter or any matter related to our beloved country.
It is my prayer that this decision will put to an end the discomfort I caused on ZANU PF.
Let me take this opportunity to apologize to those who could have been offended by my commentaries. Everything I said was grounded on my persuasion that I wanted to make a difference as an independent voice on economic matters.
Nothing was personal. Possibly, the messaging didn’t come out right. We keep learning.
</blockquote>
In October 2023, Mugano was fired from the ZimTrade Board by Foreign Affairs and International Trade Minister, Frederick Shava.
In the run-up to the 2023 Harmonised Elections, Presidential spokesperson George Charamba accused Mugano of having written the CCC’s manifesto, allegations that he swiftly rejected.
Mugano resigned from the ZISCO board in 2020 citing the response to public comments he made on government policies that were viewed to be a direct conflict with his role as a board member of a State Enterprise.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Mugano Quits Commenting On Economic Issues Amid ZANU PF Vitriol

Economist Professor Gift Mugano says the proposal by the Minister of Finance, Economic Development, and Investment Promotion Mthuli Ncube to allow only traders registered for VAT purposes and in possession of valid Tax Clearance Certificates to procure goods from manufacturers is aimed at saving established supermarkets from collapse.
Mugano said if the proposal is adopted by Parliament, more than six million people who are making livelihoods from buying and selling will be negatively affected.
In his 2024 National Budget presentation on Thursday, Ncube said:
<blockquote>
To restore the supply chain from the manufacturer, wholesaler to retailer, I propose that only licensed and Tax Compliant Operators procure goods from manufacturers and wholesalers.
In addition, I, therefore, propose that only traders registered for VAT purposes and in possession of valid Tax Clearance Certificates be eligible to procure goods from manufacturers.
I, further, propose to review downwards, the VAT registration threshold to US$25 000, or local currency equivalent, with effect from 1 January 2024.
Enterprises that meet the above threshold should, thus, register and account for VAT, failure of which applicable penalties will be invoked.
</blockquote>
Responding to the Permanent Secretary in the Ministry of Information, Publicity and Broadcasting Services Ndavaningi Mangwana, who had said small-scale retailers should either “formalise or fold up”, Mugano said:
<blockquote>
In my view, this proposed policy aims to save established supermarkets from collapse at the expense of 6 million people who are making livelihoods from buying and selling.
In your view, you are convinced that a trader without a VAT certificate is informal? Most of the traders buying from manufacturers are already formalized – securing a VAT is not the only ticket to formalization.
Are you aware that these traders make sales amounting to US$500 per month which makes it difficult for them to hit US$25 000 required for them to get VAT certificate?
Again, in your view, do you think that when you shut them out of the local manufacturing sector they will fold their hands and die?
There are high chances that they will smuggle goods into the country whilst our own manufacturing companies will be closing down as sales take a drastic fall. Is this what you want to achieve as a government?
Have you ever put a thought on how products like beer, bread and ice cream are sold? Sales of these commodities are moved by traders who can’t qualify for VAT certificates, not supermarkets.
So, what is going to happen to both traders and manufacturers of these commodities?
</blockquote>
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Proposed VAT Registration Policy Meant To Protect Supermarkets - Mugano

Economic commentator Professor Gift Mugano has implored Parliament to reject Finance, Economic Development, and Investment Promotion Minister Mthuli Ncube’s 2024 National Budget to save the majority of Zimbabweans from further impoverishment.
Ncube announced the proposed 2024 National Budget in Parliament on 30 November 2023. The budget will be debated and adopted or rejected by Parliament.
Responding to the budget proposals, Mugano urged ZANU PF and CCC MPs to reject it and request Ncube 
redo the budget and produce a pro-poor budget. <a href="https://x.com/gift_mugano/status/1730484283041534383?s=20">Wrote Mugano on X</a>:
<blockquote>
Parliament must reject the anti-people and anti-industry budget that was presented by Mthuli Ncube yesterday.
The proposed tax hikes and the move to exclude informal traders from the mainstream economy will bring more pain to the already impoverished people.
The decision to exclude traders without VAT certificates is very harsh and insensitive considering that more than 6 million people thrives on trading in the face of 85% formal unemployment and drought of economic opportunities.
These people, in their individual capacities, don’t have annual sales turnover of US$25 000 which is required to secure the VAT certificate.
This measure is expected to impact on the manufacturing sector negatively because the informal sector helps them to push volumes especially in manufacturing industries such as food and beverages (bread, ice cream, drinks, etc).
In the bread sector, for example, the volumes are pushed by vendors and tuckshops (not supermarkets) which are now supposed to be excluded from the bread value chain.
This will result in drastic fall in sales which has a net negative effect on production and jobs.
Is Mthuli Ncube aware of these dynamics and possibilities?
The following increases in taxes, levies and fees are a thorn in the flesh for an already struggling population:
– more than 100% increase in toll fees will push up bus fares and transport cost for the commuting public. The rural folks and pensioners will suffer the most as the timing of this policy measure is coinciding with a devastating drought – they will have to bear with these new measures over and above their struggle to put food on the table.
– introduction of levies on beverages with sugar is again insensitive as these are the drinks of the poor and our children.
– passport and vehicle number plates fees hikes are again schemes put in place to milk the poor.
– the US$300 will be taxed come January 2024 – so insensitive to the underpaid civil servants who were expected a salary hike.
– wealth tax reminds of the Rhodesian government which introduced hut tax and Mthuli Ncube admires the very same exploitative tax regime and introduce it again in “independent” Zimbabwe.
If Parliament is going to act in the best interest of the public, they must reject this budget and request Mthuli Ncube redo the budget and produce a pro-poor budget.
It is my prayer that ZANU PF and CCC MPs unite on this one and reject this useless budget.
If ZANU PF uses their majority vote to support this useless budget and overpower CCC by virtue of their numbers they are voting for more poverty for their rural constituencies where they got most of their votes.
In the same way, they are punishing the 6 million people in the informal sector as they will be endorsing their exclusion from the manufacturing sector value chains.
</blockquote>
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Gift Mugano Urges Parliament To Reject Mthuli's 2024 National Budget

Economist Professor <a href="https://www.pindula.co.zw/Gift_Mugano/">Gift Mugano</a> has called for a frank discussion on the accuracy of Zimbabwe’s inflation rates, the exchange rate system, the currency in which the country budgets, and the constraints on production.
He made the call on the realisation that the 2024 budget is likely to be underfunded by a large amount, with a gap of ZWL$62.2 trillion. He said the line ministries and departments submitted a budget of ZWL$110 trillion, but the proposed budget is only ZWL$47 trillion. This raises questions about why the budget is so high and how it will affect the ministries and the economy. He said on X:
<blockquote>
Last week during the budget consultations we heard estimated budget outlay for the year 2024 of around ZWL$47 trillion which is already well above the ZWL$33 trillion target set by the Honorable Minister Mthuli Ncube. In view of the foregoing observations, the following questions are pertinent: 
1. What is driving up our budget by more than 1000% when the 2024 growth outlook is expected to be around 3.5% while annual inflation has dropped to 17.3% as of October 2023 according to Zimstat? 
2. What will be exchange rate in 2024 when these trillions are offloaded into the market? 
3. Over the last 5 years @MthuliNcube exceeded his set budget as follows: 
– He set aside $8.1 billion for the 2019 budget and overspend by $6.9 billion 
– He set aside $63 billion for the 2020 fiscal year and overspent by $100.2 billion 
-He set aside $427 billion for the 2021 fiscal year and exceeded his budget by $200 billion. 
– He set aside $927 billion for the 2022 fiscal year but went on to overspend by exactly $1.112 trillion. 
– He set aside $4.5 trillion for the 2023 fiscal year but by his own admission as shown on page 10 of the 2024 budget strategy paper he is anticipating to spend exactly $25.6 trillion by December 2023, that is, + 5 times the projected budget!! In view of the foregoing observations, what is likely to be the actual budget outlay for the 2024 fiscal year? $200 trillion? 
4. As these numbers keep on changing, what happens to ZWL loans in terms of exposure for the banks? Here my question is grounded on the theory of hyperinflation and its impact on loans where the debtor becomes the winner and creditors as losers. Undoubtedly, the above facts shows that we now undertaking budgeting as ceremonial. The role of the budget in stimulating the economy has severely diminished. We need to think without a box (not outside the box because as long as the box is still around us it still remains a serious constraint to us). I suggest that we carefully and seriously consider the questions I posed above and have genuine reflection of our policy positions.
</blockquote>
Mugano also said there is a need for an honest discussion on whether the reported annual inflation rate of 17.3% is accurate or whether are we deceiving ourselves. He also asked that if it’s not accurate, why are we lying to ourselves? He further asked the following questions:
<blockquote>
Should we continue to maintain command exchange rate as well as the auction system – why can’t we move to market-determined exchange rate and disband the auction system? 
Should we have our budget in ZWL or USD? What is the cost-benefit analysis or rationale for each option? 
On production – knowing that the strength of the country’s currency, what are the binding constraints and blockages impeding production and what are possible remedies? 
</blockquote>
Government critics and economic analysts including American Professor Steve Hanke, have often argued that the Zimbabwean government understates inflation figures for political reasons, to control fiscal implications, limit cost of living adjustments, and maintain a positive international reputation. However, this has the effect of eroding trust, distorting decision-making, and hindering effective economic planning.
The Zimbabwe dollar, which came back into use in 2019 after not being used for ten years, has been losing its value quickly compared to other currencies, especially the US dollar. The government has tried different actions to make it more stable, but these measures haven’t been successful.
<h3><a href="https://www.pindula.co.zw/">More Pindula News</a></h3>

Economist Mugano Calls For Frank Discussion On Zimbabwe's Inflation, Exchange Rate, Currency

Economist Gift Mugano says the recent announcement by the Government to extend the multi-currency regime is not sincere.
On Friday, 27 October, the Government enacted Statutory Instrument 218 of 2023 which extended the duration of the multicurrency regime from 2025 to 2030.
However, posting on X, Mugano, <a href="https://www.pindula.co.zw/2023/10/04/economist-gift-mugano-fired-from-zimtrade-board/">who was fired from the ZimTrade Board by the Minister of Foreign Affairs and International Trade, Frederick Shava, last month</a>, SI 218 of 2023 which extended the multi-currency system is “a dummy”. He said:
<blockquote>
Is the SI 218 of 2023 which extended the use of the multi-currency regime to 2030 real or it’s a dummy sold to us? I think it’s a dummy.
… In my view, the extension is meant to give us the impression that the USD is here to stay and we calm down and then @MthuliNcube pulls out a shocker when we are not expecting right?
</blockquote>
Mugano cited remarks attributed to Finance, Economic Development and Investment Promotion Minister Mthuli Ncube where he explained the rationale behind the extension of the multi-currency dispensation.
Speaking at this year’s pre-budget seminar, held under the theme “Consolidating Economic Transformation”, at the new parliament building last month, Ncube said, as quoted by <a href="https://www.newzimbabwe.com/we-are-headed-for-mono-currency-lets-be-clear-about-that-says-mthuli-ncube-gives-reasons-behind-multi-currency-system-tenure-to-2030/">NewZimbabwe.com</a>:
<blockquote>
You saw the SI that we issued a few days ago, where we said because of that, we wanted an orderly situation in the market rather than disorder.
<div class="in_article">
<div>
Disorder was beginning to emerge. What we saw in the banking sector. Banks were now refusing to lend money at all, some of them in USD, so that had become chaotic.
So we thought that let’s release some pressure from the market to restore order.
</div>
</div>
</blockquote>
Minister Ncube also stated that despite extending the multi-currency regime by another 7 years, the Government has not abandoned plans for a mono-currency. He said:
<blockquote>
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.
</blockquote>
Economists estimate that 80% of the local economy is dollarised, with the gap between the official and exchange rates continuing to widen.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Statutory Instrument Extending Multicurrency Regime To 2030 "A Dummy", Says Mugano

The Harare City Council is blaming building owners for the influx of tuckshops in the central business district (CBD). The local government authority says business owners are illegally renting their buildings out to foreigners.
Street vendors and tuckshop traders are thriving, posing a threat to traditional supermarkets. The retail space is now dominated by foreigners, including Indians, Chinese, Pakistanis, Nigerians, Malawians, and Tanzanians.
The HCC small to medium enterprises committee chairperson <a href="https://www.pindula.co.zw/Denford_Ngadziore/">Denford Ngadziore</a> said the city fathers have an SME policy which has not been followed. He told <a href="https://www.newsday.co.zw/local-news/article/200017849/inside-supermarkets-tuckshops-war">NewsDay</a>:
<blockquote>
We know that most tuckshops are operated by foreigners which is against the law. Council has no power to come between business partners but building owners are renting out their buildings to foreigners who in turn convert them to retail shops.
</blockquote>
The influx of tuckshops has led to lower prices and increased competition, benefiting consumers. Tuckshops can offer lower prices due to lower overhead costs, sourcing products directly from wholesalers, and flexible pricing. However, big supermarket operators complain of unfair competition, citing tax evasion and informal trading practices.
Finance Secretary <a href="https://www.pindula.co.zw/George_Guvamatanga/">George Guvamatanga</a> questioned the validity of big retailers’ complaints about being unable to compete with tuckshops. He pointed out that tuckshops pay higher rentals, operate with cash purchases, and lack access to cheaper foreign currency, suggesting other factors may be affecting formal retailers.
Renowned economist <a href="https://www.pindula.co.zw/Gift_Mugano/">Gift Mugano</a> responded to Guvamatanga’s remarks and acknowledged that supermarkets have legitimate concerns. He attributed the high prices of goods in supermarkets to the exchange rate disparities between formal and parallel markets. Mugano said:
<blockquote>
Your ministry liberalised the imports for about 11 products. These commodities are coming through duty free and VAT-free. Tuckshops are importing these commodities, whilst our supermarkets procure the very same commodities locally — a position that is economically and morally sound aimed at fostering job creation and local content.
</blockquote>
Mugano also highlighted the compliance burdens faced by formal businesses, including taxes, levies, rentals, and salary payments. He emphasised that exchange rate fluctuations and inflation have negatively impacted formal businesses’ capital and cash flows. While the informal sector can sell in US dollars, formal businesses must comply with the law, which Mugano believes is appropriate.
<h3><a href="https://www.pindula.co.zw/">More Pindula News</a></h3>

Harare City Council Accuses Building Owners Of Illegally Renting Tuckshops To Foreigners

The Minister of Foreign Affairs and International Trade, Frederick Shava, has fired economist Gift Mugano from the ZimTrade Board.
ZimTrade is a joint venture between the Government of Zimbabwe and the private sector to promote Zimbabwean exports.
In a letter addressed to Mugano, Secretary for Foreign Affairs and International Trade, James Manzou said the termination of Mugano’s membership from the ZimTrade Board is with immediate effect. He said:
<blockquote>
I wish to inform you that the Minister of Foreign Affairs and International Trade has terminated your membership from the ZimTrade Board in terms of Article 10 of the Constitution of ZimTrade as read with Section 16 of the Public Entities and Corporate Governance Act [Chapter 10:31]. The termination is with immediate effect.
I wish to thank you for the services rendered to the Board and the Ministry and to wish you well in your future endeavours.
</blockquote>
Section 16 of the Public Entities and Corporate Governance Act [Chapter 10:31] provides for the appointment and removal of board members of public entities.
The section outlines the grounds for the removal of board members, which include misconduct or incompetence, failure to attend board meetings without reasonable cause, conflict of interest, and conviction of a criminal offence, among others.
Over the past few months, Mugano has been critical of the Government’s economic policies.
In the run-up to the 2023 Harmonised Elections, Presidential spokesperson George Charamba accused Mugano of having written the CCC’s manifesto, allegations that he swiftly rejected.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Economist Gift Mugano Fired From ZimTrade Board

Economist Gift Mugano says ZANU PF’s policies since Zimbabwe attained independence in 1980 have been a disaster.
After reviewing ZANU PF’s manifesto and policies over the past four decades, Mugano came to the conclusion that the ruling party’s achievements on the economic front equal zero. Mugano tweeted:
<blockquote>
At independence, Zimbabwe adopted a strong economy whose currency was stronger than the USD, i.e., Z$1 = US$1.5.
The @ZANUPF_Official adopted an economy with massive protection which include exchange controls, trade protectionism and a planned economy. Import controls on capital goods, in particular, restricted growth.
Likewise, social spending on health and education resulted in an unsustainable budget deficit and rising debt.
As a result, @ZANUPF_Official bowed to pressure from within its party, @czionline &amp; the Bretton Woods Institutions to liberalise the economy under the Economic Structural Adjustment Programme (ESAP).
The main focus of ESAP was to liberalise trade, liberalise financial markets, exchange controls and the entire economy as well as cutting on social spending.
In implementing ESAP, ESAP coincided with the devastating 1992 drought. To make matters worse, the 
@ZANUPF_Official didn’t logically sequenced the implementation of ESAP as it was hurriedly implemented in 2.5 years instead of 5 years, suffered from the absence of strong institutions and complementary policies such as industrial, trade and agricultural policies.
Resultantly, the results of ESAP were a DISASTER characterised by exchange rate volatility, soaring interest rates, rising imports reaching 20% on an annual basis, trade deficit rising to 20% of GDP, economic contraction and an emergence of an informal sector.
In 1997, the GOZ dished out unbudgeted packages to war veterans which resulted in the crash of the ZWL, i.e., the Black Friday of 14 November 1997.
To make matters worse, the GOZ participated in the DRC war which drained the country’s forex reserves. Up to now, the country has not realised any economic gain from the DRC war.
In early 2000, the GOZ implemented a chaotic land reform that disrupted robust agricultural value chains and rendered the country into a basket case.
The land reform could have been done in an orderly manner if the GOZ introduced a land tax on land holdings in the same way the PAYE is implemented.
This could have pushed the white commercial farmers to release the excess land whilst continuing farming on the remaining land.
To make matters worse, the @ZANUPF_Official unleashed violence &amp; various forms of human rights abuse on the opposition.
The combination of human rights abuse, rising debt and land reform, saw the country being slapped with sanctions (see ZIDERA).
Between 1998 – 2008, the lost decade, the combination of international isolation, recklessness on the part of 
@ZANUPF_Official through printing of money, rampant abuse of human rights in an unprecedented manner (ref short or long sleeve of the 2008), corruption, etc, the economy contracted by 52%, inflation picked to 89.7 sextillion % (89,700,000,000,000,000,000,000%).
As a result, the economy crashed. We lost our currency, pensions, savings and jobs.
Between 2009 – 2013, we were governed by a GNU and the economy performed exceptionally very averaging 10% per year.
Between 2013 – 2018 @ZANUPF_Official took charge of the economy and run incessant budget deficits &amp; electronic printing of ZWL which saw the birth of the RTGS &amp; rising domestic debt from 0 to US$9.4 billion.
The period 2018 to date saw @MthuliNcube putting the nail in the coffin. He assumed office when annual inflation in July 2018 was 4.3% &amp; drove it to 837.5% in July 2020 (after suspending inflation estimation in July 2019) &amp; 1200% as of 13 June 2023 (ref @steve_hanke).
He also drove the national debt from US$10 billion in 2018 to US$18.73 billion to date. Our budget short from $8.1 billion in 2018 to $4.5 trillion – a record of 56,000%. Health &amp; education is dead. Again, we lost our pensions, savings &amp; jobs.
Between 2018 -2023, the population in extreme poverty rose from 29% to 49% (see ZIMSTAT).
@ZANUPF_Official FAILED. Achievement = Zero
</blockquote>
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Economist Gift Mugano Reviews ZANU PF Manifesto, Policies

Renowned economist Gift Mugano has commended Treasury for allowing businesses to keep 100% of their locally generated forex revenue.
Speaking to <a href="https://www.newsday.co.zw/thestandard/business/article/200011510/it-will-not-work-industry-tells-ncube">The Standard</a>, Mugano a professor of economics, however, said the removal of import duty on 11 selected products will expose the local industry while draining foreign currency from the country. He said:
<blockquote>
The move by the government to open the borders for basic commodities under the argument that they want to push improvement and availability of basic commodities; I don’t think it’s a good one.
It clearly exposes our local industry and it becomes a significant drainer of foreign currency because we are allowing unrestricted draining of foreign currency to import goods.
My view on this: I think the government is being emotional about the current price spike.
The tragedy is that the price hikes will continue because local manufacturers will be forced to charge Zimdollar and United States dollars in the shops as required by law, but those who are going to import commodities, particularly cross border will not charge in Zimbabwean dollars.
This will further deepen dollarisation and use of United States dollar because they need foreign currency to be able to go back and import again.
</blockquote>
According to The Standard, the Zimbabwean dollar fell to $2 700 against the United States dollar from about $1 200 a week ago.
But officially, during the same period, the Zimbabwe dollar fell to $1 222.27, against the greenback.
The depreciation of the local unit has led businesses to increase prices to preserve the value of goods and services, thereby making a recent 100% salary increment for civil servants meaningless.
In fact, some commentators say civil servants were better off before the salary increment in April than they are at present as far as their earnings in local currency are concerned.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

"Removal Of Import Duty On Groceries Will Expose Local Industry And Drain Forex"

Gift Mugano, a professor of economics, has urged the Government to improve on governance and accountability of Zimbabwe’s natural resources following Invictus Limited Energy’s confirmation of the presence of “light oil, gas-condensate and helium” in its Cabora Bassa Basin (Muzarabani).
The Australia-listed firm announced its find on Monday, 08 May 2023. Invictus Managing Director Scott Macmillan said that mud gas analysis from the Mukuyu-1 well drilled last year had proved the presence of hydrocarbons in multiple reservoir pay zones.
Speaking to <a href="https://www.newsday.co.zw/local-news/article/200011291/eureka-zim-discovers-oil">NewsDay</a> on Monday following Invictus’s announcement, Mugano challenged the Government to put in place systems that will not ensure that Zimbabweans benefit from the find unlike what allegedly happened with the Chiadzwa diamonds where “US$15 billion vanished”. Said Mugano:
<blockquote>
This is good news, but the worry rests on our approach to our accountability of natural resources.
To be honest with you, we should not be holding our breath over oil and gas as if that is the only thing which we have in this country.
We have over 60 minerals, which are being plundered every day.
There is chaos in the lithium and gold industry. There’s chaos in precious metals like diamonds.
Zimbabweans want answers about what is going on with their resources.
As for me, I will hold on to my celebrations personally.
What are we celebrating because this was the same story with diamonds?
It’s not more about the availability of gas and oil, but it’s more about what we are going to do in terms of governance and accountability of our minerals.
Good news, but we cannot go to a party because we are used to this whole good news and we have not got anything out of it.
We are challenging the government that, in as much as this is good news, their systems and policies must not disappoint us.
</blockquote>
In a shareholder update yesterday, MacMillan said:
<blockquote>
Results from the mudgas compositional analysis definitively prove the presence of hydrocarbons in multiple reservoir pay zones at Mukuyu-1 consistent with the wireline log interpretation, fluorescence and elevated mudgas readings.
… We are extremely pleased with the results from the mudgas analysis which confirm our geological modelling of the Cabora Bassa Basin and the presence of both light oil and gas condensate provides us with confidence as we prepare for the drilling of Mukuyu-2 in Q3 this year.
</blockquote>
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

"Too Early To Celebrate Discovery Of Oil In Muzarabani"

Professional accountants have engaged the government over the move to measure inflation using a weighted average of items priced in Zimbabwean dollars and United States dollars, the “weighted blended inflation rate”.
Accountants argue the adoption of the weighted blended inflation rate has severe consequences when reporting financials.
Speaking to <a href="https://businesstimes.co.zw/accountants-engage-govt-over-blended-inflation/">Business Times</a>, Institute of Chartered Accountants of Zimbabwe CEO, William Mandisodza, said:
<blockquote>
For now, what I can say is that we are lobbying for some alignment with the policymakers.
Commenting outside those discussions will not create the right environment for ongoing discussions.
</blockquote>
Economist Gift Mugano told the publication that blended inflation was a “rigged methodology”. Said Mugano:
<blockquote>
The major danger here is confidence as the government is not taking responsibility by putting the right measures. It’s like it has run out of ideas.
Government wants to reign in inflation from a rigged methodology and say our inflation is now below 100%.
They are not putting the right measures to deal with inflation and they are now going for rigging and I want to repeat this is pure rigging.
It sends the wrong message in showing that we have failed to deal with inflation.
</blockquote>
He argued that the way the prices are increasing in ZWL$ is different from the way the prices are increasing in US$, therefore, inflation should be calculated using the respective currency either in ZWL$ or US$ but separately. Said Mugano:
<blockquote>
A worker that is paid in ZWL$ is facing a steep price regime whereas the one earning in US$ is enjoying price stability.
It’s not correct to say that the prices in the US have annual inflation of 92%.
That is not correct because prices in hard currency have single-digit inflation.
This is totally misleading and uncalled for.
</blockquote>
In early March 2023, the Minister of Finance and Economic Development Mthuli Ncube promulgated Statutory Instrument 27 of 2023 which read in part, … ‘rate of inflation’ means the general increase in price levels of goods and services measured as a weighted average based on the use of Zimbabwean dollars and United States dollars over a given period of time.”
Using the blended rate, the Zimbabwe National Statistics Agency (ZIMSTAT) said the year-on-year inflation for March was 87.6% and 92.3% in February.
More: <a href="https://zero.pindula.co.zw/">Pindula News</a>

Accountants Engage Govt Over Weighted Blended Inflation Rate

Economics Professor Gift Mugano says increasing productivity is the only way to break the currency cycle in Zimbabwe and reinforce the stability of the Zimbabwe dollar.
Some economic commentators believe that the local currency “is technically dead” as US dollar transactions are now around 80 percent.
Speaking during an interview with <a href="https://www.businessweekly.co.zw/zim-heads-for-another-painful-currency-cycle/">Business Weekly</a>, Gift Mugano said “the easiest policy move” that the government can take to break the currency reforms merry-go-round is to stop corruption and the issuance of statutory instruments. Said Mugano:
<blockquote>
We need to be a productive economy. Arguably addressing production challenges requires a day on its own but off the top of my head, I would argue for the removal of arbitrage opportunities in our foreign currency markets, reform the financing of agricultural models by moving away from state finance to a market system development where actors in the value chains take an active role in financing agricultural production and use of special economic zones as effective vehicles to attract investments.
Most importantly, the easiest policy move that government can take is radically stop corruption and guarantee policy consistency, clarity, and predictability and make a deliberate position to stop the issuance of statutory instruments.
</blockquote>
He also said the new salary increment for civil servants will increase the volume of transactions in US dollars which will in turn result in an increase in “fake US dollars” in the banking system.
Mugano said the “fake” US dollars or US dollars in RTGS are being created by the banking system and Government, combined, through the process of issuance of loan creation and treasury bills which are later discounted. He said:
<blockquote>
The new salaries will also place civil servants in better positions to borrow in the US dollar, which will drum up the electronic US dollar as banks draw more income in the form of interest rates and charges.
The severity of the loans on civil servants and of course other workers from the private sector are centred around the fact that they don’t generate foreign currency.
In the absence of figures of the US dollar balances in the government purse, one can only predict that the new salaries can be destabilising because they are quite significant.
</blockquote>
Since its re-introduction after ten years of a multi-currency system, the Zimbabwe dollar’s value has plunged dramatically.
On 21 March 2023, the official exchange rate was US$1: ZWL$915.
More: <a href="https://zero.pindula.co.zw/">Pindula News</a>

Productivity Only Way To Break Zimbabwe's Currency Cycle - Gift Mugano

The Zimbabwe Dollar is now technically dead and this will be followed by a USD cash crunch, economists have warned.
Economics Professor Gift Mugano has said the Zimbabwean economy has already attained the peak of dollarisation as US dollar transactions are now around 80 percent.
Speaking during an interview with <a href="https://www.businessweekly.co.zw/zim-heads-for-another-painful-currency-cycle/">Business Weekly</a>, Mugano observed that the economy could be heading towards another “painful currency circle” that could have serious implications on investments and confidence. He said:
<blockquote>
If you look at all indicators available, that is, the percentage of transactions in US dollars and the percentage of loans in US dollars, I would argue that we have already attained the peak of dollarisation.
You agree with me that at least 80 percent of loans and transactions are now in US dollars.
Some sectors such as pharmaceuticals have reached a 100 percent level of transactions in US dollars.
Going forward, I doubt if we can make further significant gains as far as the level of dollarisation is concerned.
Rather, I see the economy driving back to the Zimbabwe dollar. In simple terms what I am saying is that we are in the 2013-2018 replay.
</blockquote>
Mugano warned that the banking system and Government, combined, were facilitating a process for the creation of “fake” US dollars or US dollars in RTGS.
He said this is being done through the process of issuance of loan creation and treasury bills which are later discounted. Said Mugano:
<blockquote>
When loans are issued the bank is anticipating income interest rate and associated bank charges yet the borrower is not generating foreign currency, that is, through exports or international consultancy.
Likewise, when the Ministry of Finance and Economic Development issues treasury bills in US dollars which are later on discounted they are technically printing money that is not backed by hard notes in USDs.
This process results in the creation of USD in RTGS which I call fake USDs. To date, our banking system has an estimated figure of US$1,5 billion of USDs in RTGS platform, that is, fake USDs, while the real hard notes are around US$1 billion.
This is the premise of my argument that the Zimbabwe dollar is on its way back.
</blockquote>
An economist with a State-owned financial institution told Business Weekly that the Zimbabwe dollar “is technically dead”, adding:
<blockquote>
I think the Zimbabwe dollar will be lost now, but it will be short-lived.
This will be followed by a US dollar cash crunch down the road, and we begin all over again.
</blockquote>
In 2009, the government abandoned printing Zimbabwean dollars entirely due to hyperinflation and adopted the use of foreign currency in all local transactions.
In early 2019, the Reserve Bank of Zimbabwe (RBZ) announced plans to bring back the Zimbabwe dollar as legal tender.
Since its re-introduction, initially as bond notes, and then as RTGS dollars, the Zimbabwe dollar’s value has plunged dramatically.
On 21 March 2023, the official exchange rate was US$1: ZWL$915.
More: <a href="https://zero.pindula.co.zw/">Pindula News</a>

"Zimbabwe Dollar Technically Dead"

Economic commentator Gift Mugano has predicted that Zimbabwe’s annual inflation will be 400% with the exchange rate likely hitting ZWL$1500: US$1 by June this year.
The Zimbabwe dollar is currently trading at ZWD$1.100 to the USD on the black market, <a href="https://www.newzimbabwe.com/annual-inflation-to-reach-400-while-exchange-rate-likely-to-hit-zw1500-by-june-says-economic-analyst/">reported NewZimbabwe.com.</a>
Year-on-year inflation was also the highest in the world at 255% in November last year.
Responding to claims by the Reserve Bank of Zimbabwe (RBZ) governor John Mangudya, that the country’s de-dollarisation was on course, Mugano said on the contrary, the central bank’s policies are driving dollarisation.
He argued that chronic inflation and the 200 percent interest rate are some of the main drivers of dollarisation. Said Mugano:
<blockquote>
I am still convinced that the following remains our economic outlook by June 2023; annual inflation of 400% and exchange rate ZW$1500/US$1.
… we have deepened dollarisation. The main drivers of dollarisation are chronic inflation, 200% interest rate, excess liquidity caused by Treasury and domestic export retention as well as high export retention.
With a 200% interest rate, businesses have switched to USD loans since it has virtually become impossible to pay back loans fourfold.
The 20% domestic export retention and 40% export retention compels RBZ to print ZWL in exchange for the 20% domestic deposits and 40 percent export receipts.
RBZ does not have a budget set aside for this. This drives up money supply. In August and September 2022, money supply rose by $708 bn excess liquidity driven by the treasury.
</blockquote>
Mugano noted that excessive liquidity driven by treasury is driving inflation and de-dollarisation cannot be achieved in such an environment. He said:
<blockquote>
Excessive liquidity driven by treasury – without going far, in December 2022, treasury irresponsibly made last-minute payments to Ministries and government departments’ requests thereby putting the rate into disarray.
</blockquote>
The Treasury could have staggered these payments during the course of the year.
<blockquote>
Inflation and de-dollarisation can only happen when the country attains single-digit inflation and exchange rates are stable.
This will cultivate a productive culture which is key to supporting the local currency. This is missing. We have chronic inflation and volatile exchange rates.
</blockquote>
To further prove his point that the economy is dollarising, Mugano pointed to the sudden decline of allotment from the RBZ’s auction system. He said:
<blockquote>
The auction system allotment is an interesting one. In 2022 imports surged to above US$ 8.2 billion (exceeding 2021 imports by US$1 billion) but the USD allotted to firms declined from US$42 million per week to US$11 million.
So imports are increasing but the forex given by the RBZ to firms to support imports is falling.
It tells you one thing, firms are now relying on their own generated forex from local sales to meet their import requirements.
This means that we have deepened dollarisation.
</blockquote>

Top Economist Predicts Sharp Rise In Inflation, Exchange Rates By June 2023

The rising cost of living, inflation hovering over 250 per cent as well as a weak local currency meant that arguably millions of Zimbabweans could not enjoy Christmas as much as they would have wanted.
A survey carried out by <a href="https://www.newsday.co.zw/thestandard/news/article/200005511/christmas-without-the-cheer">The Standard</a> revealed that the majority of adult Zimbabweans would rather set aside the little saved during a difficult year for increased school fees, and high prices of uniforms and stationery.
Economic commentator Gift Mugano said this year’s festive season is a difficult one for the majority of Zimbabweans. Said Mugano:
<blockquote>
The starting point to note is that 49% of people in Zimbabwe are living in extreme poverty.
When you are in extreme poverty, you are living on less than US$1 a day.
So it means that for that segment of the population it’s in a mess.
They don’t have enough resources to celebrate the festive season.
</blockquote>
He also noted that the high tare of inflation coupled with almost stagnant salaries eroded disposable incomes. Said Mugano:
<blockquote>
It means the prices are increasing at a faster rate. Employers cannot compensate their workers enough.
Aggregate and that average demand have been falling by an average of 33%.
This has an impact on income going to companies and they are also constrained to pay their employees.
So we are getting into Christmas, the festive season, without money.
So for parents who are struggling, it does not make sense to spend money on Christmas festivities or New Year celebrations and then get stuck in as far as payment of fees is concerned.
</blockquote>
Meanwhile, the Confederation of Zimbabwe Retailers (CZR) president, Denford Mutashu said retailers had tried to cushion their customers. He said:
<blockquote>
We have consistently lobbied and advocated for not only a friendlier policy environment but for business to price responsibly.
The stability enjoyed in the last quarter of the year is a direct result of government and business engagement which the association has been part of.
</blockquote>

"Difficult Christmas For Zimbabweans"

Economic commentator Gift Mugano says measures implemented by the government to stabilise the economy in the course of 2022 such as interest rate hikes are unsustainable.
Speaking in a recent <a href="https://www.businessweekly.co.zw/prof-mugano-doubts-govt-interventions-to-stabilise-economy/">interview with Business Weekly</a>, Mugano likened the measures that have resulted in relative economic stability to “national fasting”. He said:
<blockquote>
We can’t sustain the current stability by refusing to pay contractors and other service providers and then thinking that we can hold on for a long time.
Likewise, we cannot sustain stability on the back of a 200 percent interest rate. The 200 percent interest rate is killing business.
There is no business that can run a business sustainably with the 200 percent interest rate. It can only be a thief which can pay back the loan fourfold!
This is why you see that businesses are now switching their ZWL into USD loans. This is unprecedented.
It defies logic for a debtor to run away from a soft currency which naturally is eroded by inflation to the advantage of the debtor at the expense of the creditor.
</blockquote>
Mugano conceded that generally interest rate hikes are a necessary measure to mitigate inflation but argued that “Zimbabwe is a complicated economy.” He added:
<blockquote>
The interest rate hikes, yes, slow down credit creation and contain the money supply in the process.
However, you must remember that money supply is also driven by national and export retentions.
For example, the current national budget shows that 42,3 percent of the budget is earmarked towards civil servants’ salaries and the remainder, that is, 57,7 percent is split between capital and recurrent expenditure (which excludes salaries).
So, if we consider the current of $1,9 trillion, it means that $ 1.1 trillion will be disbursed to government service providers who will are insulated from interest rates.
Likewise, in the 2023 budget, $2,2 trillion was allocated towards capital and recurrent expenditures while $2,2 trillion was allocated towards salaries.
Combined, it follows that the $4,4 trillion budget will drive up money supply in 2023.
With respect to export retentions, the RBZ doesn’t have reserves of Zimbabwe dollars nor a budget set aside for the liquidation of the 40 percent and 20 percent export and domestic export retentions, respectively.
This means that at every point when RBZ liquidates foreign currency, in line with the defined thresholds, it prints money.
This explains why broad money increased by $402 billion and $308 billion on -month-on-month in August and September 2022 topping broad money supply to $1,9 trillion in September 2022.
Based on this observation, although the 200 percent interest has restrained money supply, that is, caused by credit creation, its effectiveness is still watered/weakened by the resurgence of money supply from the budget and liquidation of export retentions.
Going forward, in view of the fact that the RBZ has announced that it will review the 200 percent interest rate and export retentions in March 2023, it follows that money supply will continue to increase mainly through the channels of higher export retentions and budget spending.
</blockquote>

Mugano Doubts Govt Interventions To Stabilise Economy

Economic commentators have reacted following the addition of four Zimbabwean nationals and two Zimbabwean companies to the United States sanctions list.
The four individuals are <a href="https://www.pindula.co.zw/Emmerson_Mnangagwa_Junior">Emmerson Mnangagwa, Jr</a>., Kudakwashe Tagwirei’s wife, Sandra Mpunga, Nqobile Magwizi, and Obey Chimuka, along with the two companies, Fossil Agro and Fossil Contracting. 
In a statement, the U.S. Treasury’s Office of Foreign Assets Control said it designated the four individuals and two companies for corruption and human rights abuses.
Speaking to VOA News, Gift Mugano, an economics professor at the Durban University of Technology, said the sanctions are making it difficult for Zimbabwe to attract investors and get capital for essential projects such as power plants.
He, however, said corruption and wrong priorities are also negatively impacting the country’s economy. Mugano said:
<blockquote>
When you are under sanctions, you must be more careful and prudent when using your resources.
The case in point is the 35 million US dollars which is being given to members of parliament and ministers, the package which they have been given.
But we do not have basics in the hospitals. Thirty-five million dollars for Zimbabwe can be a game changer.
</blockquote>
Gibson Nyikadzino, an independent analyst, told VOA News that the U.S. sanctions are hurting Zimbabwe’s economy. Said Nyikadzino:
<blockquote>
Because there is a failure to access foreign capital, and capital markets, there is a failure even to import critical equipment.
So, the whole idea of sanctions is to ensure that the economy of Zimbabwe screams and that is the first essence of why the West imposed sanctions, and even to today, the economy is being hurt.
</blockquote>
However, the United States, Britain and European Union officials have long rejected claims by Zimbabwe that sanctions are making Zimbabweans suffer.
The architects of the sanctions insist that sanctions target individuals and certain companies rather than state institutions.
Piers Pigou, a senior consultant for southern African human rights watchdog, International Crisis Group, said:
<blockquote>
There is no doubt that the sanctions have an impact on aspects of the economy. In some instances directly as it relates to individual entities and individuals that are on the list.
What is difficult is to calculate the extent of that impact. Particularly in a context where there are multiple other factors relating to delinquencies and governance.
</blockquote>
| <a href="https://www.voanews.com/a/zimbabwe-reacts-after-us-adds-president-s-son-to-sanctions-list-/6874565.html">VOA News</a>

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