• Repeal of SI 81A: RBZ has repealed Statutory Instrument 81A of 2024, eliminating penalties for businesses pricing goods and services above the official exchange rate
• Increased Pricing Flexibility: The introduction of SI 34 of 2025 allows businesses to price goods and services in line with market conditions, including parallel market rates
• Limited Role of ZiG: Despite the policy shift, the Zimbabwe Gold (ZiG) is expected to play a limited role in transactions, with the economy likely to remain heavily dollarised

Harare- Government has repealed Statutory Instrument 81A of 2024, which penalised businesses for charging goods and services above the official exchange rate set by the Reserve Bank of Zimbabwe (RBZ).

This policy shift coincides with the government’s view that the Zimbabwe Gold (ZiG), launched in April 2024, is experiencing increased demand, as indicated by the exchange rate premium narrowing from nearly 100% in September 2024 to 27% by April 2025.

The government suggests that the limited availability of ZiG will encourage businesses to maintain reasonable prices in the currency. This article examines the context of SI 34 of 2025, the reasons for the narrowing premium, the potential effects of the policy change, and the broader economic factors at play.

Background: The ZiG and Exchange Rate Controls

The ZiG was introduced in April 2024 to replace the Zimbabwe dollar, which had faced significant challenges due to hyperinflation and depreciation. To support the ZiG’s adoption, the RBZ implemented strict foreign exchange controls, including a 5% trading margin for the interbank market, which limited how businesses could price goods relative to the official exchange rate.

SI 81A of 2024 reinforced these controls by imposing penalties on businesses pricing above the official rate, with fines up to ZiG200,000 or the equivalent of the foreign currency charged, plus a 5% daily penalty for non-compliance.

This approach was not new. The government, due to its indiscipline in the past, has frequently relied on Statutory Instruments to stabilise the local currency by choking parallel market exchange rates.

Statutory Instrument 127 of 2021, enacted during the Zimbabwe dollar era, similarly penalised businesses for deviating from the official exchange rate, which saw blue-chip firms like National Foods facing hard consequences.

SI 127 imposed fines and potential imprisonment for entities using parallel market rates, aiming to curb speculative trading and restore confidence in the local currency.

However, these measures often led to market distortions, reduced business confidence, and increased reliance on the US dollar (USD), as they failed to address underlying economic challenges such as fiscal deficits and limited foreign exchange reserves.

Like SI 127, SI 81A of 2024 aimed to reduce activity in the parallel market, where the ZiG traded at higher rates than the official interbank rate, but it similarly faced challenges in a multi-currency economy where the USD is widely used.

By September 2024, the parallel market premium reached nearly 100%, reflecting a significant gap between the official and unofficial exchange rates and limited use of the ZiG in transactions, leading to a 43% devaluation of the ZiG on 26 September 2024.

The Introduction of SI 34 of 2025: A Policy Change

SI 34 of 2025, enacted in April 2025, repeals SI 81A, eliminating penalties for businesses pricing above the official exchange rate.

This follows the RBZ’s February 2025 monetary policy statement, which relaxed the 5% trading margin, allowing banks and businesses to trade at margins aligned with international practices.

In March 2025, RBZ Governor John Mushayavanhu noted that the official rate should guide pricing, but the removal of penalties indicates a move toward greater pricing flexibility.

The government likely attributes this policy shift to its observation that the ZiG is in higher demand, citing the reduction in the exchange rate premium to 27% by April 2025.

It posits that the limited supply of ZiG will lead businesses to price competitively in the currency. The reduction in the exchange rate premium from 100% to 27% is primarily driven by the RBZ’s tight monetary policies, which have restricted the money supply and liquidity of the ZiG.

These policies include measures such as limiting money creation, maintaining high interest rates, increasing reserve requirements for banks, and using gold and foreign currency reserves to support the official exchange rate.

By reducing the availability of ZiG, the RBZ has constrained the parallel market’s ability to diverge significantly from the official rate, resulting in a narrower premium.

However, the ZiG’s role in everyday transactions remains limited. Businesses and consumers predominantly use USD for payments, particularly for essential goods and services, due to its stability and widespread acceptance. The ZiG is mainly used for government-mandated transactions, such as tax payments, and has a marginal presence in the broader economy.

Thus, the narrowing premium reflects the impact of monetary policy measures rather than a significant increase in the ZiG’s use as a medium of exchange.

Implications of SI 34 of 2025

The repeal of penalties under SI 34 of 2025 is expected to have several effects on Zimbabwe’s economy. Businesses can now price goods and services in line with market conditions, including parallel market rates. This may reduce the administrative burden of adhering to strict exchange rate rules and help firms manage currency risks in a multi-currency environment.

With the premium at 27%, businesses may set higher prices in ZiG compared to USD to account for the currency’s perceived risk of depreciation. This could lead to price disparities between ZiG and foreign currency transactions, depending on market dynamics. However, this is not an outcome expected in the short term due to the scarcity of the ZiG.

The policy change does not directly address the preference for USD among businesses and consumers. Without broader acceptance of the ZiG, the economy is likely to remain heavily dollarised, with the ZiG playing a limited role in transactions.

However, the removal of penalties may encourage businesses to openly price at parallel market rates. If monetary policy controls are loosened or confidence in the ZiG weakens, the premium could widen again, reflecting ongoing market pressures. Hence, the government needs to continue tightening liquidity or expand ZiG use.

Broader Economic Context

The government’s emphasis on the narrowing premium as an indicator of ZiG’s demand highlights certain economic dynamics but does not fully address underlying challenges. Zimbabwe’s economy faces persistent fiscal deficits, limited foreign exchange reserves, and constrained productive capacity, which affect confidence in the local currency.

The ZiG’s peg to gold and foreign currency reserves has provided some exchange rate stability, but its limited convertibility and circulation pose barriers to wider adoption. The RBZ’s tight monetary policies have helped stabilise the exchange rate but have also reduced liquidity, limiting businesses’ access to capital and contributing to slower economic activity.

These policies have supported the narrowing of the premium but have not yet translated into increased use of the ZiG in the market.

The historical reliance on Statutory Instruments, such as SI 127 of 2021, to enforce exchange rate controls reflects a pattern of short-term interventions that have often failed to address structural economic issues. These measures, while aimed at stabilising the local currency, have typically led to market distortions and increased dollarisation, as seen in the limited adoption of the ZiG.

Therefore, the introduction of SI 34 of 2025, repealing SI 81A, reflects a shift toward more flexible exchange rate policies in Zimbabwe. Breaking the cycle of reliance on Statutory Instruments, as seen with SI 127 of 2021 and earlier interventions, will require addressing the root causes of economic instability to foster sustainable confidence in the local currency.

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