Government Enforces Use Of ZiG Currency – Eduzim News

Commentary on Enforcement and Strengthening of ZiG Currency

By Linda Tsungirirai Masarira

14 December 2024

The announcement by Deputy Minister of Finance, Kudakwashe David Mnangagwa, regarding covert operations to enforce the use of the Zimbabwean ZiG currency underscores the government’s growing concern about the slow acceptance of the gold-backed currency.

This move comes as part of efforts to bolster confidence in the ZiG, which was introduced in April 2024 as a gold-backed currency aimed at stabilizing the economy and reducing reliance on foreign currencies like the US dollar.

The operation reflects the Government’s strategy to enforce the use of the ZiG.
While ensuring the circulation and acceptance of the ZiG is critical to its success, the dual approach of persuasion and compulsion raises questions about the sustainability of such measures.

Forced compliance through law enforcement, arrests, and fines risks creating resistance among businesses and the public, undermining trust in the ZiG rather than building confidence.

To strengthen confidence in the ZiG and ensure its integration into the economy, the government must prioritize creating consistent and widespread demand for the currency. A more effective and economically sound approach would involve incentivizing the use of the ZiG while discouraging reliance on the US dollar through fiscal policies. We propose the introduction of a transaction tax on USD payments to make its usage less attractive. Simultaneously, reducing VAT rates for transactions conducted in ZiG would create a tangible financial benefit for businesses and consumers who adopt the local currency. This dual strategy will encourage a gradual shift toward the ZiG without coercion, fostering voluntary acceptance and reinforcing its credibility as a stable and reliable currency.

One critical step would be mandating that fuel be sold exclusively in ZiG, as fuel is a key commodity that drives economic activity across all sectors. By anchoring such a high-demand product to the local currency, the government can immediately boost its usage and legitimacy.

Moreover, all government services, including passport applications, licenses, and other administrative fees, should only be payable in ZiG. This approach will institutionalize the currency’s use, ensuring that it becomes the default medium of exchange for accessing essential services. By doing so, the government demonstrates its confidence in the currency and encourages both businesses and citizens to adopt it for daily transactions.
Creating demand for a currency is essential for it to take root in the economy.

Without sufficient demand, no amount of enforcement will sustain its usage. By aligning policies to promote organic demand for the ZiG through strategic pricing mechanisms, targeted incentives, and exclusive use in critical sectors, the government can gradually phase out reliance on the US dollar.

This will complement measures such as introducing a transaction tax on USD usage and reducing VAT for ZiG transactions, further incentivizing the local currency without over-reliance on compulsion.

Additionally, the government must ensure the fundamentals of the ZiG are strong—transparent gold reserves, consistent supply, and public awareness campaigns highlighting the benefits of the currency. Trust in the currency is built on its perceived stability and usability, not through punitive measures.

A collaborative approach that engages stakeholders, including businesses and consumers, will be more effective in establishing the ZiG as Zimbabwe’s preferred medium of exchange.

Ultimately, the success of the ZiG depends not only on enforcement but on its practicality and acceptance as a stable, reliable, and widely usable currency. Transparent management of its gold backing and a clear communication strategy to build public trust are equally vital to this effort.

In conclusion, the ZiG, introduced as a gold-backed currency to stabilize Zimbabwe’s economy, holds immense potential to restore confidence and reduce reliance on foreign currencies.

However, its success hinges on consistent monetary policies and fostering trust in the market. By implementing strategic measures to create demand such as mandating its use for essential goods and services, incentivizing its adoption, and ensuring transparency in its management, the government can transform the ZiG into a widely accepted and stable currency.

A strong, reliable ZiG will not only strengthen economic sovereignty but also lay the foundation for sustainable growth and resilience in Zimbabwe’s financial system.

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