Zimbabwe’s Pricing System Endures as Confidence in ZiG Declines

Zimbabwe’s ongoing economic challenges are once again reflected in the persistence of a three-tier pricing system. This method continues to dominate retailers’ practices, demonstrating the instability of the local currency.

Since its introduction on April 5, 2024, the Zimbabwe Gold-Backed Digital Currency (ZiG) initially offered hope for economic recovery. It held promise, bringing a sense of optimism to Zimbabwe’s business community.

However, just four months after its release, the local currency began losing value. The widening gap between official and parallel market exchange rates quickly diminished confidence in its sustainability.

The Reserve Bank of Zimbabwe (RBZ) attempted to intervene. In September 2024, the central bank took drastic measures by devaluing the currency by 43%. Interest rates were also raised to curb borrowing.

Despite these efforts, Zimbabwean retailers have largely retained their reliance on foreign currencies, particularly the US dollar. They continue to adopt a three-tier pricing system, where prices vary depending on the payment method.

A recent survey by NewZimbabwe.com showed that many businesses in Harare’s Central Business District (CBD) still struggle with the ZiG. Retailers prefer exclusive US dollar pricing for key products.

Retailers also continue to limit the number of goods that can be purchased using the local currency, further complicating efforts for Zimbabweans relying on the ZiG to buy necessities. The approach underscores the widening disparity between the country’s official currency and market reality.

This is not the first time Zimbabwe has faced difficulties with its currency. Over the years, the country has experienced a string of failed currencies, including the Zimbabwe dollar, bearer’s cheques, and bond notes.

The introduction of the ZiG was yet another attempt to stabilize the economy and restore trust in the country’s monetary system. However, its early struggles have placed it on a trajectory similar to previous failed attempts.

Retailers, grappling with fluctuating exchange rates, are forced to maintain three separate pricing systems. The first price applies to payments made in US dollars. The second is for electronic transactions, and the third applies to purchases using the ZiG.

This pricing structure complicates the lives of ordinary Zimbabweans. Prices for goods in local currency are often higher than those in foreign currencies, eroding purchasing power and increasing inflationary pressures.

For many Zimbabweans, this has become a familiar situation. Over the years, they have seen the local currency go through multiple rebrandings, none of which has managed to restore long-term stability. The previous iterations of the currency reflect a repeated cycle of economic struggle and reinvention.

Each rebranding came with a promise of renewed trust and a better future. From bearer’s cheques to RTGS dollars, and now ZiG, Zimbabweans have yet to see a currency that truly withstands market forces.

With the introduction of the ZiG in April, the hope was that the gold-backed nature of the currency would prevent a repeat of hyperinflation and collapse. Yet, five months into its life, the cracks are already showing, leaving many wondering if it can survive.

The continuing three-tier pricing system demonstrates that retailers are not ready to rely solely on the local currency. It signals a lack of confidence in its long-term viability and highlights the broader issues within Zimbabwe’s economy.

The persistence of exclusive US dollar pricing for certain goods speaks to the country’s reliance on the greenback. It also shows the local economy’s struggle to wean itself off foreign currencies in favor of a stable and trusted domestic currency.

As the ZiG follows the trajectory of its predecessors, questions remain about whether Zimbabwe can achieve the currency stability it has long sought. The central bank’s interventions may offer temporary relief, but until trust in the currency is restored, reliance on foreign currencies will continue.

Zimbabwe’s economy remains fragile. The country’s businesses are reluctant to embrace the ZiG fully, fearing that it will meet the same fate as past iterations. Meanwhile, consumers are caught in the middle, navigating an increasingly complicated system.

This ongoing situation illustrates the critical need for comprehensive monetary reform in Zimbabwe. Without it, the economy will continue to struggle with inflation, a lack of currency confidence, and the persistent use of foreign currencies.

The three-tier pricing system is more than just an inconvenience; it reflects a deeper issue. Until there is a currency that Zimbabweans can trust, the local economy will remain tethered to the US dollar, leaving the ZiG in a precarious position.

The Zim Bulletin