ZiG’s Declining Value Threatens Zimbabwe’s Retail Sector

The Zimbabwe Gold currency (ZiG) has lost 80% of its value since its launch, causing severe repercussions for formal retailers in Zimbabwe. Retailers warn that the government’s fixed exchange rates and the reliance on the black market for currency valuations threaten their operations, leading to potential business closures unless urgent changes are made. The Retailers Association of Zimbabwe urges the government to allow the market to determine exchange rates to foster economic stability.

Since its introduction in April, the Zimbabwe Gold currency (ZiG) has dramatically depreciated, losing an alarming 80% of its value in the black market. Retailers in Zimbabwe have raised concerns that the government’s fixed exchange rate is contributing to financial losses and market instability, warning that without urgent changes, many formal retail businesses may be forced to close. The current rate of exchange, set at US$1 to ZIG13.9, is criticized for being unrealistic, exacerbating the already precarious inflation situation rather than alleviating it. Retailers argue that their suppliers are increasingly dependent on black market exchange rates to price goods, creating a two-tier pricing system that is unsustainable for formal shops. As the black market rate soared to ZiG26 per US dollar this week, many legitimate retailers face a choice: to either increase prices in order to maintain profit margins or to sell goods at a loss which is no longer viable. The Retailers Association of Zimbabwe (RAZ) has suggested that the government allow the market to dictate the exchange rate, asserting that the lack of consumer confidence in the local currency might lead to further economic instability if changes are not implemented swiftly.

The introduction of the Zimbabwe Gold currency aimed to stabilize the economy plagued by hyperinflation and a lack of faith in local currencies. However, the rapid depreciation of ZiG since its launch has eroded trust in its allusions to backing by gold, with many accusing the government of acting with arrogance rather than sound economic policy. The scenario echoes previous monetary reforms in Zimbabwe, where attempts to control currency valuation have repeatedly resulted in inflationary spirals. Desperate for a reliable currency, consumers and businesses have reverted to utilizing foreign currencies, predominantly the US dollar and South African rand, creating a further divide in the marketplace and threatening the existence of formal retailers.

In conclusion, the deteriorating value of the Zimbabwe Gold currency is severely affecting formal retail operations throughout the country, with retailers warning that without a revision of the current exchange rate policies, many businesses may not survive. The economic situation depicts a troubling dichotomy where suppliers rely on a volatile black market rate, while inflation continues to rise, driving consumers away from formal shops. As the call for market-determined exchange rates grows louder, it is crucial for the Zimbabwean government to heed these warnings to prevent further economic collapse.

Original Source: www.news24.com