Zimbabwe’s retail sector is facing an existential threat due to unsustainable currency distortions, sparking fears of widespread store closures and economic implosion.
The crisis has prompted urgent calls for the government to revisit its exchange rate policies.
The Retailers Association of Zimbabwe (RAZ) warned that its members are operating in an unsustainable environment, with suppliers maintaining two-tier price lists for local currency and foreign currency. This has led to steep price increases, driving consumers to informal channels.
Steve Hanke, an American economist, this week sounded the alarm on Zimbabwe’s runaway inflation and “reckless” monetary policy, warning of devastating economic consequences.
He reported that Zimbabwe’s money supply (M2) is increasing at an alarming rate of 253% per year. As a direct consequence, Zimbabwe’s inflation rate has soared to 880% per year, according to Hanke’s accurate measurements.
Hanke concluded that Zimbabwe’s economy is “up in flames,” indicating a severe economic crisis.
Economist Gift Mugano has criticised the government’s “command” exchange rate, urging liberalization to reflect market realities.
“The central bank must liberalise the exchange rate, but I understand where the central bank is coming from.
“So ideally, before the ZiG was launched, it was supposed to build enough reserves. So it is like we are now in the midst of a problem, of a storm, where the right things must be done, but there is not enough space, sufficient ground created for the liberalisation of exchange rate to work,” Mugano said.
However, President Emmerson Mnangagwa has remained optimistic, vowing to protect Zimbabweans from economic disruptions. Addressing Zanu-PF Politburo on Wednesday, the President warned against acts of economic sabotage,
“Acts of economic sabotage, speculative and counter-productive tendencies by those who thrive on greed and profiteering have no place in our country. Attacks on the economy to make the public suffer are unacceptable and my Government will protect the ordinary people,” Mnangagwa said.
Despite Mnangagwa’s assurances, the Zimbabwe Gold (ZiG) has continued to plummet, trading at ZiG35-40 on the alternative market and ZiG13,9854 on the interbank market. Authorities attribute the depreciation to speculation, but critics argue it’s driven by market sentiment and expectations.
Experts warn that policing the ZiG won’t work without liberalising the exchange rate.
“You can’t run the economy by statutory instruments, threats, and arrests,” said political commentator Maxwell Saungweme.
The crisis has revived memories of Zimbabwe’s 2008 economic meltdown.
Linda Masarira, an opposition leader and activist, has criticised the Reserve Bank Governor John Mushayavanhu’s recent claims that the World Bank is responsible for Zimbabwe’s currency issues.
In a statement, Masarira argued that the government’s swift introduction of a new currency without addressing underlying economic problems, such as trust issues, inflation, corruption, and lack of accountability, was a severe miscalculation.
She stated that Zimbabwe’s economic environment was not ready for a new currency rollout.
“While the World Bank and other international financial institutions may offer advice on structured currency systems, they are in no way responsible for a government’s decision to implement such policies without addressing the fundamental economic conditions necessary for success,” Masarira stated.
“The swift and ill-prepared introduction of a new currency without addressing critical factors such as trust, inflationary pressures, corruption, and accountability was a severe miscalculation.
“The reality is that Zimbabwe’s economic environment was far from ready for a new currency rollout. There are glaring issues that need to be addressed, such as:
“The public’s lack of faith in government institutions is one of the most significant barriers to currency stability.
“Trust is the bedrock of any functioning monetary system, yet in Zimbabwe, repeated economic mismanagement, erratic policies, and unclear communication have eroded this trust, rendering the currency unstable from the outset.”
She added: “Without stabilizing inflation we will keep swimming in the same dark, murky waters. Before any meaningful currency reform, Zimbabwe must adopt stringent fiscal policies to control inflation.
“Working closely with the central bank, the government must tighten monetary supply and carefully monitor inflationary trends to prevent further economic collapse.
“Strengthening gold reserves is the only way to resuscitate ZiG. A detailed strategy should be crafted to bolster gold reserves and ensure these reserves are used effectively to back the currency, instill trust, and provide long-term economic stability.”