Market speaks, Govt listens

LIVINGSTONE MARUFU AND SAMANTHA MADE

In a watershed moment for Zimbabwe’s economic policy, the government has repealed Statutory Instrument 81A of 2024, a move widely applauded by business leaders and economists as a major step toward restoring market confidence and promoting formal sector competitiveness, Business Times can report.

By scrapping the regulation that tied prices to the official exchange rate, authorities have signaled a renewed commitment to market-led reforms—ushering in what many see as a decisive shift toward liberalisation, transparency, and business sustainability.

The CEO Africa Roundtable has lauded the government’s decision to repeal Statutory Instrument 81A of 2024, describing it as a bold step that fosters a more competitive and equitable business environment.

The CEOs said the repeal marks a pivotal shift that will empower formal businesses and boost broader economic confidence.

Statutory Instrument 81A, introduced in May 2024, compelled businesses to transact at the official interbank rate set by the Reserve Bank of Zimbabwe (RBZ), effectively barring them from pricing goods and services above that benchmark. The instrument was widely criticized for distorting pricing structures and hurting formal sector players.

“The CEO Africa Roundtable commends the Government of Zimbabwe for its progressive decision to repeal Statutory Instrument 81A of 2024.
This landmark move demonstrates a commitment to fostering a more equitable and competitive economic environment, which will undoubtedly benefit formal businesses and the broader economy,” it stated.

The organization added that the decision will have a positive impact as it will liberalize the foreign exchange rate system.

“By taking this step, which previously mandated the use of the official exchange rate for pricing goods and services, the government has made a significant move toward liberalizing the foreign exchange market.
This will enable businesses to adopt market-driven rates and will empower formal operators to compete more effectively with informal traders, thereby promoting transparency and fairness in the marketplace,” the CEO Roundtable said.

It further noted that the move is in line with Zimbabwe’s broader reform agenda.

“This decision aligns with Zimbabwe’s broader economic reform agenda, which seeks to enhance governance, attract investment, and pave the way for sustainable growth.
CEO Africa Roundtable recognizes the importance of and has been calling for such reforms as they will create a conducive environment for business. We therefore acknowledge the government’s decisive action to address the challenges faced by formal enterprises.”

Investment banker and Vice President of the Zimbabwe Economics Society, Misheck Ugaro, welcomed the move, saying it proves that the exchange rate is not fixed.

“The gazetted SI 34 is welcome because it proves to the market that the exchange rate is not fixed. In fact, the exchange rate was freed in February when the RBZ issued its Monetary Policy Statement (MPS). However, there was an existing law from the past, SI 81A, which controlled the exchange rate to within 10% of the bank rate. That law was inconsistent with the new MPS, so what the Minister has done is to repeal that law so that the new MPS position can work with no controls,” he said.

According to Ugaro, the reform could lead to appreciation of the Zimbabwe Gold (ZiG) currency due to increased market confidence, sufficient liquidity, and rising reserves.

“I don’t think this move will depreciate the currency because we have seen it stable after the MPS. In fact, the currency has strengthened on the parallel market from ZWG40:US$1 to ZWG33-35: US$1 even before the removal of the old law. That shows the market is gaining confidence in the ZWG. It is likely that the ZWG may in fact appreciate now freely because the RBZ is providing enough liquidity to meet demand in the banks for genuine imports.”

He added that inflation is expected to ease.

“We also expect to have the first annual inflation figure under ZWG next month which must also be coming down from the previous highs of Zimdollar. Remember the last Zim dollar inflation was above 72% and now is expected to come in down around 50% and further down to 30-35% by the end of this year. If all this succeeds, the ZWG will remain stable.”

FBC Securities also weighed in, calling SI 34 of 2025 a critical structural reform that acknowledges the importance of market forces and pricing freedom.

“(It’s a) relief from exchange rate misalignment losses. With pricing no longer pegged to the official rate, operators can now price goods and services in line with market-based exchange rates, allowing greater alignment between input costs and selling prices. Sustainable prices in ZWG that reflect true input costs help businesses restore and improve working capital, avoid stock-outs and rebuild profitability and liquidity.
Formal businesses can match or compete with informal sector pricing on a level playing field. However, the cost of doing business is still biased against formal businesses that are exposed to high regulatory costs suppressing their margins. Regulatory reforms that minimise this cost are still needed to complement SI 34 of 2025.”

The research firm also noted that businesses will now be protected from enforcement threats.

“Businesses are no longer under threat of fines, penalty interest and reputational damage from enforcement of SI 81A of 2024.”

FBC warned, however, of potential inflationary effects.

“Pricing at market exchange rates will likely raise ZWG-denominated prices, particularly in supermarkets and other retail shops, fueling short-term ZWG inflation. With greater flexibility, businesses may create wide price differentials based on payment currency. If the central bank does not maintain its monetary policy discipline, the premium may widen again, undermining the monetary sector stability gains that have been realized so far.”

The firm emphasized that long-term gains depend on policy discipline.

“Long-term success depends on continued monetary policy discipline, transparent exchange rate management and regulatory reform that reduces cost of doing business in the formal sector.
The new measure is capable of increasing tax compliance and improve the credibility of the ZiG, albeit with a short-term risk of ZiG inflation.”

Economist Dr Prosper Chitambara described the repeal as a critical step toward rebuilding trust in the economy.

“It’s generally a positive move that signals the further liberalisation of the foreign exchange market, which is critical in terms of restoration of confidence not only on the interbank market but in the entire economy. Unscrupulous businesses would abuse that but we hope through the moral suasion many businesses would use this opportunity wisely. That’s what observers and scholars have been advocating for. The move is critical in giving confidence in the market and economy.”

Economic analyst Victor Bhoroma praised the decision but called for robust implementation.

“I think it’s the best decision that the government has ever made. If that particular statutory instrument is going to be implemented to its full breadth, that is going to help the businesses. The businesses are there for profits and need to replenish their stock, hence they need no limits and restrictions,” Bhoroma said.
“The formal businesses were at the mercy of informal traders that could sell their products outside the retail chains at cheaper prices in United States dollars. This is the best tool that the government has implemented in a bid to level the playing field between the formal retailers and informal traders who don’t pay taxes and other statutory obligations.
The most efficient way to grow the economy is to ensure that there is an independent market equilibrium where supply is able to watch demand, so in a way if the formal retailers are now able to price their goods and services using a market-determined rate, they can now be able to replenish stock. This is certainly good news for retailers in terms of paying suppliers and replenishing stock.”

Another economist Malone Gwadu emphasized that the move is part of a broader effort toward price discovery.

“It’s a step in the right direction although it’s not necessarily business charging their own exchange rate, rather it’s a determination of exchange rate based on bids submitted through market authorised dealers which are then weighted then determine the rate. So this is a step in the right direction in our journey towards price discovery of our currency which should be able to give accurate reflection that is both market determined and reserves backed.”

He dismissed fears of immediate manipulation.

“It’s quite remote at the moment for manipulation of the exchange rate as the interwoven deterring mechanism make it difficult for such to occur. These include tight monetary policy stance which arrests money supply growth, liquidity mopping stats reserves, active monitoring of trade by FIU, and most importantly doing away with Quasi Fiscal Operations which have been a key exchange rate mover whenever excess liquidity is injected in the market. Manipulation is possible yes but at the moment it’s quite remote.”