ZiG registers gradual growth in transactions

ZIMBABWE has seen steady growth in the use of the Zimbabwe Gold (ZiG) in domestic transactions since introducing the currency in April this year, a senior official said.

Finance, Economic Development and Investment Promotion permanent secretary George Guvamatanga told a breakfast meeting to digest contents of the 2024 mid-term budget review in Harare yesterday that ZiG now accounted for 39 percent of domestic transactions, from 30 percent in April.

The balance, 61 percent of transactions, continues to be conducted in foreign currency, mainly US dollars.

This demonstrates growing acceptance and wider use of the domestic currency, which replaced the Zimbabwe dollar, which had become susceptible to exchange rate volatility.

The sustained depreciation of the Zimbabwe dollar resulted in many economic agents refusing to accept it as a form of payment.

Authorities have since rolled a coterie of interventions to support the ZiG, which is backed by gold and foreign currency reserves.

The support measures include maintaining tight monetary and fiscal policy regimes.

Import duty for certain luxury goods will also be paid in ZiG to promote its demand and wider use in the economy.

The interventions form part of phased de-dollarisation, with the multicurrency regime provisioned to run until at least 2030.

Treasury has also demanded that businesses generating more than half their revenue in hard currency pay taxes on a 50-50 split between ZiG and US dollars.

Further, it has directed that all presumptive tax obligations be payable in the local currency.

Addressing participants at the Zimbabwe Economic Society and Friedrich-Ebert Stiftung (ZES/FES) 2024 mid-term budget breakfast meeting, Mr Guvamatanga said most of the local currency was being used for transactions in electronic form compared to the physical notes and coins.

However, efforts are underway to increase the distribution of physical notes, particularly to outlying rural areas to improve the ZiG circulation across the economy.

He noted that smaller denominations were lying in abundance at the Reserve Bank of Zimbabwe (RBZ) as key economic players were not withdrawing the money for their and the public’s convenience.

Mr Guvamatanga said the fastest way to distribute the local notes and coins was through formal retailers and transporters, but this was not happening as expected.

This has seen the Government turn to alternatives, including the use of HomeLink to distribute the notes and coins via public places to improve the circulation and availability of change.

Efforts were underway to increase the circulation of small divisible notes to enable the general public to pay for transport fares and other small value obligations.

At the beginning of the year and the greater part of last year, USD constituted about 80 percent of local transactions as the local currency depreciated immensely.

However, the introduction of the ZiG has brought a modicum of stability, therefore retailers and other formal players of the economy are growingly accepting the local currency for transactions.

“To say that the ZiG is not circulating is not correct,the ZiG has been accepted in the market but it is only circulating in electronic form.

When we introduced the ZiG, the portion of transactions was 80-20 percent and now we are at 61-39 percent so there has been a very marked increase in the use and acceptance of ZiG, we are seeing more transactions in ZiG.

“From a Government revenue perspective, it is the same. There is also movement from this 80-20 percent and now we are at 61-39 percent.

“The ZiG is stable, but we just need to make sure that the smaller physical notes and coins circulate to where it is required,” said Secretary Guvamatanga.

He also noted that the Government had no intentions to temper free funds from remittances and will continue treating them as free funds.

According to the Permanent Secretary, these free funds include funds from NGOs, funds for diplomatic missions salaries, and other uses.

Secretary Guvamatanga alluded that tampering with free funds will cause a major and unnecessary disruption in the market. “For years, remittances in this country have been treated as free funds. It is your money.

“It is given to you in the form you want and you use it as you, please. The Government has no intention whatsoever to change that position.

“We have no intention to temper with anything called free funds and that is the Government’s official position,” said Mr Guvamatanga.-herald