‘Treasury looms as biggest threat to currency stability’

PHILLIMON MHLANGA AND LIVINGSTONE MARUFU

Zimbabwe’s ambitious push to establish a monocurrency by 2030 faces its greatest threat not from the Reserve Bank of Zimbabwe (RBZ), but from the Treasury, economists  and business leaders warn.

They said mounting domestic debt and unpaid obligations are imperiling financial stability.

“The Treasury is the biggest threat to currency and financial stability,” Professor Gift Mugano told Business Times on the sidelines of the CEO Africa Roundtable in Victoria Falls, cautioning that government arrears are pushing the economy to the brink.

“You would have noted that in recent months, in recent years, Treasury has accrued domestic debt of US$8.9 bn. This is threatening survival of businesses and so crowding out financial markets.”

Professor Mugano said the Treasury currently owes US$1.2 billion to service providers, with US$175 million in Treasury Bills (TBs) already matured without payment, and about US$800 million in TBs maturing this year, taking total domestic debt to US$11.2 billion.

“This is a threat to macroeconomic stability, because they are not only acquiring this debt or building up on non-payments without affecting the owner of the capital. Companies are being strained along the way. And right now, there’s no recourse to the central bank. But as things stand, the risk is that the central bank might be put under pressure by government to pay. And once they pay, then that can put everything up in smoke.”

He added that the absence of strong institutions is a key problem.

“..we trade billions of dollars in currency in the streets. The currency is a commodity in Zimbabwe. It can only happen when there’s corruption.”

Professor Mugano also criticised Treasury’s handling of foreign exchange, highlighting a policy misstep where exporters are forced to liquidate 30% of forex earnings in ZiG, leaving them unable to meet operational costs. “So you’re killing the industry by not paying the business,” he said.

He stressed the need for a national approach.

“What we have is the RBZ roadmap to monocurrency by 2030. What is needed is a national roadmap not the RBZ roadmap,” Professor Mugano said.

All efforts to get a comment from the Minister of Finance, Economic Development and Investment Promotion, Professor Mthuli Ncube and permanent secretary George Guvamatanga were futile.

Another  economist, and former Zimbabwe Economic Society president Dr Nigel Chanakira echoed Professor Mugano’s concerns, noting that trust in fiscal policy remains fragile.

“Zimbabwe’s fiscal and monetary policy always dances with politics. Whenever we had stability, like now, it’s commendable, but it’s statistically insignificant to persuade us fully that we’ve crossed the barrier. The fiscal side, we don’t trust. Treasury Bills are not being honoured in terms of maturities. There is no coordination between government officials,” he said.

Private sector executives warned that the RBZ’s de-dollarisation roadmap alone cannot restore confidence. WestProp Holdings CEO Ken Sharpe said:

“History teaches us, and it tends to repeat itself. We can’t afford a situation where we get to December 31, 2030, and then find ourselves making decisions that none of us had really accepted at the onset… Up to now, it has not been a market-led decision.”

RBZ Deputy Governor Dr Jesimen Chipika acknowledged the challenges, describing confidence as a “legacy issue” and highlighting efforts to rebuild trust. Foreign currency reserves, she said, have risen to US$900m in September from US$276m in April 2024, with expectations to hit US$1bn by year-end. Zimbabwe now has 1.2 months of import cover, up from 0.4 months last year.

Commercial lawyer Farai Mushoriwa called for full independence of the central bank to shield it from Treasury pressures.

“What guarantee do we have that when the demand to print this monocurrency in 2030 comes, the Reserve Bank is going to say no? Because that is our problem. We’re going to print the hell out of it, and we’re going to be right back to where we’ve come from. I really don’t want to go through another currency here. I don’t agree with the rushing to monocurrency 2030 push. That breaks my heart right there.”