RBZ calms jittery markets

PHILLIMON MHLANGA 

The Reserve Bank of Zimbabwe (RBZ) has moved to calm jittery markets by guaranteeing that U.S dollar contracts will remain valid well beyond the government’s 2030 de-dollarisation deadline, in a dramatic policy shift aimed at averting another currency crisis, Business Times can report.

“Do not worry about post 2030. Issue those contracts willy nilly. A contract that will be in US dollars will remain in US dollars. When you have US dollars contract, it will be allowed to run to its logical end. Banks can get lines of credit that can go past 2030,” RBZ Deputy Governor Dr Innocent Matshe said on Friday.

His assurances come against the backdrop of growing unease in Zimbabwe’s financial sector after the government last year announced that the multicurrency regime, under which the U.S dollar and other foreign currencies circulate alongside the local unit, would end in December 2030.

The plan was part of President Emmerson Mnangagwa’s long-term strategy to restore the Zimbabwean dollar as the sole legal tender.

The 2030 timeline has been a source of nervousness in an economy scarred by nearly two decades of currency collapses, bouts of hyperinflation, and forced policy reversals.

Some banks had already been reluctant to issue loans and lines of credit with maturities extending beyond the deadline, fearing repayment uncertainties.

The uncertainty harked back to 2019, when the government abruptly outlawed the use of foreign currency under Statutory Instrument 142, forcing businesses to transact in a rapidly weakening local dollar.

The decision triggered widespread panic, a collapse in confidence, and a surge in parallel market activity, scars that still run deep across the economy.

The central bank’s latest intervention seeks to prevent a repeat of that instability.

By affirming that contracts in U.S dollars would be honoured even after 2030, the Reserve Bank hopes to calm investors, banks, and businesses that rely on dollar-denominated obligations for trade, imports, and credit lines.

In October 2023, President Mnangagwa bowed to pressure from the business community and extended the multicurrency system’s lifetime to 2030 through Statutory Instrument 218 of 2023.

The decree reversed his earlier plan to end dollarisation by 2025, a timeline that had already unsettled markets.

“Settlement of any transaction or payment for goods and services in foreign currency shall be valid until the 31st December 2030,” read part of the government gazette.

Economists estimated that nearly 80% of transactions in Zimbabwe were conducted in U.S. dollars, a reflection of waning confidence in the Zimbabwe dollar and its new iteration, the Zimbabwe Gold (ZiG).

RBZ Governor Dr John Mushayavanhu recently defended the government’s broader de-dollarisation agenda, insisting that Zimbabwe will have the necessary economic fundamentals in place to support a transition to a mono-currency regime by 2030.

“The de-dollarisation roadmap will be crystalised in the National Development Strategy II. The roadmap will undoubtedly encapsulate the need to maintain the current stability, preserve the foreign currency accounts and the existing USD-denominated contracts. I am confident all the necessary fundamentals will be in place to support the transition,” Dr Mushayavanhu said.

The National Development Strategy II (NDS2), covering 2026 to 2030, will succeed NDS1 and guide Zimbabwe’s bid to achieve upper-middle-income status by the end of the decade.

For the RBZ, the goal is to strengthen the Zimbabwe Gold (ZiG) and gradually reduce dependence on the U.S. dollar without triggering panic in the market.

Authorities have pointed to signs of increasing use of ZiG in transactions as evidence of progress. The proportion of electronic ZiG in the National Payments System rose from 26 per cent in April 2024 to over 40% by June 2025.

Demand for ZiG cash has also surged, prompting the central bank to direct commercial banks to make at least 3 per cent of their deposits available in physical currency.

“The Reserve Bank will ensure that banking institutions that have not already started distributing ZiG cash through ATMs have done so by the end of September 2025. Currently, the banking sector is holding in their vaults a total of over ZiG200 million in cash awaiting distribution to banking clients in need,” Dr Mushayavanhu said.

Yet despite these measures, economists argue that public confidence in the local unit remains fragile. Memories of hyperinflation in 2008, when prices doubled every few hours and the local dollar became worthless, continue to haunt households and businesses.

The RBZ is thus walking a tightrope, encouraging the adoption of ZiG while reassuring markets that the U.S. dollar, the anchor of stability, will not suddenly be abandoned.

For now, Matshe’s assurances that “contracts in US dollars will remain in US dollars” appear to have bought the central bank some time to stabilise expectations.

The move could also unlock new long-term credit lines for banks and corporates, which had been frozen by the uncertainty of the 2030 deadline.

But analysts warn that credibility will be key.

“Policy consistency is critical. Zimbabwe has burnt bridges before by reneging on currency promises. Investors and the public will need more than statements. They will need proof of discipline and reforms,” an independent economist, Mehluli Sibanda told  Business Times.

Zimbabwe’s struggle mirrors challenges faced by other emerging markets that have tried to forcibly de-dollarise.

From Argentina to Angola, abrupt shifts away from the dollar have often backfired, triggering capital flight and inflationary spirals.

The most successful cases, such as Israel in the 1980s, relied on gradual reforms, fiscal discipline, and transparent communication.

Zimbabwe’s economy, battered by sanctions, a lack of foreign direct investment, and limited access to concessional financing, remains highly dependent on the confidence of its domestic business community and diaspora remittances, both of which lean heavily on the U.S dollar.

Whether Zimbabwe can achieve its 2030 dream of a mono-currency system anchored on the ZiG remains uncertain.

For now, the RBZ has at least offered clarity to banks, corporates, and households: U.S dollar contracts will be honoured beyond 2030.

That assurance, if followed through, could be the difference between another cycle of financial chaos and a smoother, more credible transition to monetary sovereignty.