Currency volatility stifles industry

LIVINGSTONE MARUFU IN VICTORIA FALLS

Zimbabwe’s business community has raised alarm over the continued volatility of the Zimbabwe Gold (ZiG) currency, warning that persistent instability is stifling industry growth and eroding business confidence across the country.

The calls for urgent intervention follow the sharp 43% devaluation of the ZiG in September 2024, which shattered hopes of currency stability and deepened scepticism over the government’s latest monetary experiment. The ripple effects of that devaluation continue to weigh heavily on the economy, with year-on-year inflation climbing to 92.1% in May 2025, up from 85.7% in April, and expected to worsen in June.

Speaking at the on-going Zimbabwe National Chamber of Commerce (ZNCC) Annual Conference,in Victoria Falls this yesterday, business leaders painted a bleak picture of an economy grappling with currency instability, policy uncertainty, and mounting fiscal challenges.

ZNCC Chief Executive Officer Christopher Mugaga told delegates that the volatile ZiG has become a major impediment to industrial operations, undermining economic recovery prospects.

“The major issue dominating ZNCC discussions for 2024 and 2025 has been the persistent demand for a stable local currency,” Mugaga said. “We are not opposed to having a local currency, but what businesses need is one that is stable and reliable. Only when that happens can we collectively focus on rebuilding the economy.”

Mugaga noted that the currency crisis has been a key driver of inflation, making it difficult for businesses to plan, invest, or price goods and services competitively.

Introduced in April 2024, the ZiG is the latest in a string of efforts by Zimbabwean authorities to restore monetary sovereignty after the dramatic collapse of the Zimbabwe dollar (Zimdollar) in 2009, when hyperinflation decimated the currency and forced the economy to dollarise.

While authorities had hoped the ZiG, backed in part by gold reserves, would restore confidence, its performance has so far fallen short of expectations. Although monthly inflationary pressures have reportedly eased in some periods, the exchange rate remains under severe pressure, and many businesses and consumers continue to reject the ZiG in favour of more stable foreign currencies.

Economists warn that continued currency volatility is choking formal sector production, disrupting supply chains, and making it nearly impossible for businesses to develop long-term growth strategies.

“Without a stable currency, production becomes a gamble. Pricing, wage negotiations, import planning — all of that is thrown into disarray,” said one Harare-based economist.

For many Zimbabweans, the spectre of past currency failures remains fresh, with the September 2024 devaluation further undermining already fragile public trust.

The International Monetary Fund (IMF) has also sounded alarm bells over Zimbabwe’s worsening fiscal situation, citing increased debt servicing costs and macroeconomic pressures linked to the transfer of the Reserve Bank of Zimbabwe’s external debt to the Treasury.

The IMF estimates that Zimbabwe’s total public debt reached US$21.2 billion in 2023, equivalent to 96.6% of GDP, with much of that debt classified as unsustainable and in distress. Legacy external arrears and high borrowing costs continue to block the country’s access to affordable international financing.

“The debt overhang has a huge impact on restricting Zimbabwe from accessing patient capital due to elevated country risk,” Mugaga warned. “We need to address this urgently if we hope to secure affordable loans from international financial institutions.”

The IMF has urged Zimbabwe to implement comprehensive fiscal reforms, including increased domestic resource mobilisation, fiscal consolidation, improved debt management, and growth-enhancing structural changes. The institution also called for urgent resolution of external arrears to restore debt sustainability.

“Persistent challenges in deficit financing have exerted pressure on the ZiG. Restoring macroeconomic stability will require consistency, transparency, and a market-driven approach,” the IMF said in its latest assessment.

As the ZNCC 2025 Annual Conference continues, industry leaders have reiterated the urgent need for structural reforms to stabilise the macroeconomic environment and unlock sustainable growth.

ZNCC President Tapiwa Karoro underscored that addressing the currency crisis requires more than ad hoc measures, urging a coordinated policy approach backed by clear institutional reforms.

“For sustained economic stability and industrial resilience, Zimbabwe requires a holistic policy framework that includes structural reforms, improved governance, and a clear currency transition strategy,” Karoro said.

He added that ZNCC remains committed to engaging policymakers to advocate for business-friendly policies that build investor confidence and create a stable operating environment for industry.

“The success of any economic recovery depends on consistency, predictability, and trust in government policies. Without that, business confidence and investment will continue to suffer,” Karoro stressed.

Beyond currency instability, businesses have flagged a growing list of challenges hampering operations. These include mounting tax obligations, aggressive revenue collection, depressed liquidity, high borrowing costs, and continued policy inconsistency.

Many in the private sector warn that unless these issues are addressed alongside currency reforms, Zimbabwe risks further de-industrialisation and deepening economic malaise.

While authorities have defended the ZiG as a critical tool for restoring monetary stability, industry leaders remain unconvinced, pointing to the persistent exchange rate volatility and lack of broad-based confidence.

As the conference deliberations continue, business leaders are expected to push for a transparent, consultative approach to economic policymaking — one that prioritises stability, accountability, and the creation of a predictable environment where businesses can operate, invest, and grow.

Until then, the volatile ZiG, coupled with Zimbabwe’s unsustainable debt burden and structural economic weaknesses, continues to stifle industry, undermining hopes for a swift and sustainable economic turnaround.