ZiG-only policy could fuel black market surge

This week, a chorus of economists and business leaders delivered a warning that policymakers would be reckless to ignore.

Their message was grounded in the lived realities of a dollarised economy still struggling to rebuild trust in its own currency.

The government’s directive to pay all public sector suppliers exclusively in local currency may have been conceived as a bold step to entrench the ZiG.

However, it risks becoming a textbook case of policy misalignment, where intention collides with market reality, and the consequences reverberate far beyond Treasury corridors.

By forcing suppliers, many of whom rely on imported inputs, to accept ZiG in a market that remains between 95% and 99% dollarised, authorities may have inadvertently set off the very chain reaction they seek to avoid. Businesses paid in local currency will still need US dollars to restock, retool, and remain operational. If those dollars are not reliably accessible through formal channels, the parallel market becomes not a choice, but a necessity.

That is how distortions begin.

The warnings from economists such as Eddie Cross, Vince Musewe, Tony Hawkins, and others are striking not because they are alarmist, but because they are consistent.

The policy risks driving demand for foreign currency underground, fuelling exchange rate instability, stoking inflationary pressures, and ultimately undermining the very currency it seeks to promote.

This is not conjecture. Zimbabwe has walked this path before.

Attempts to impose currency preferences without corresponding market support mechanisms have historically led to widening gaps between official and parallel exchange rates.

Once that divergence takes hold, it feeds a vicious cycle, pricing distortions, supply shortages, speculative behaviour, and a collapse in confidence.

The cost of restoring stability thereafter is always far higher than the perceived gains of the initial intervention.

To its credit, the Reserve Bank of Zimbabwe has moved quickly to reassure the market, insisting that the directive does not signal the end of the multi-currency system and that sufficient foreign currency exists within the Willing-Buyer Willing-Seller framework.

These assurances are necessary but they are not sufficient.

Markets do not respond to statements, they respond to consistency, predictability, and access.

If suppliers cannot seamlessly convert ZiG into US dollars at competitive and reliable rates, no amount of reassurance will prevent them from seeking alternatives. And when they do, the parallel market will not just re-emerge, it will strengthen, becoming the de facto clearing house for economic activity once again.

Business leaders, too, have raised pragmatic concerns. The Zimbabwe National Chamber of Commerce has underscored the risk that benchmark pricing mechanisms, if misaligned with actual production costs, could render supply contracts unsustainable. This is not merely a procurement issue, it is a supply chain risk with potential national implications.

Shortages, after all, do not announce themselves with policy statements. They appear quietly, first in delayed deliveries, then in reduced inventories, and eventually in empty shelves.

There is, of course, a more optimistic view.

Some argue that if carefully managed, the policy could support the gradual reintroduction and circulation of the local currency.

But this outcome hinges on conditions that are far from guaranteed: disciplined fiscal management, robust foreign currency availability, timely payments to suppliers, and above all, trust.

Without these pillars, the policy risks becoming what one economist aptly described as a “self-manufactured currency crisis.”

The deeper issue here is not whether Zimbabwe should strengthen its local currency.

That objective is both legitimate and necessary.

The question is how.

Currency reform cannot be imposed through administrative force.

It must be earned through credibility. Businesses and consumers alike must choose to use the local currency because it is stable, reliable, and trusted, not because they are compelled to.

Anything less invites resistance. And in an economy as adaptive as Zimbabwe’s, resistance does not manifest in protest, it manifests in behaviour.

Firms reprice. Traders hedge. Consumers adjust. And before long, the formal system is quietly bypassed.

This is the risk now confronting policymakers.