Kudzanai Gerede, The Financial Gazette

TREASURY should create stronger demand for the local currency through tax policy changes in the mid-term budget review ex­pected later this month to accelerate the transition to a mono-currency system, Africa Economic Development Strate­gies (AEDS) executive director Gift Mugano has said.

This comes as the current level of dollarisation continues to undermine efforts by the authori­ties to establish ZiG as the sole medium of exchange once the ‘conditions precedent’ are met.

Crucially, the Reserve Bank of Zimbabwe (RBZ) is targeting to raise foreign currency reserves of up to six-month import cover before mono-currency transition.

“The current situation shows the intensity of dollarisation at the expense of a drive towards mono-currency and can be cor­rected by creating demand for ZiG. This requires Treasury and the whole system of government to tilt towards the use of ZiG by increasing proportions of taxes (i.e., VAT, import duties, and ex­cise duties) in ZiG,” Mugano told delegates at the AEDS Mid-Term Economic Review High-Level Policy Dialogue this week.

“In some instances, the treas­ury may need to make a deliber­ate move to demand payment of selected tax heads exclusively in ZiG.”

Authorities have been imple­menting several measures aimed at strengthening confidence in the ZiG, albeit with limited suc­cess, while maintaining a multi-currency regime, a situation that has seen the market opt for a much more stable greenback.

Mugano said the current tax framework was inadvertently lim­iting the circulation of ZiG within the economy and increasing pressure on the foreign exchange market.

“In the same vein, the Treasury may need to consider amending the Finance Act, which compels firms to pay taxes in the currency of trade for the simple reason that miners can­not use the ZiG received from the central bank under the 30 percent export retention. At the moment, miners participate in the interbank market with a view of securing foreign currency on their ZiG balances, yet they could have given it to the Treasury and reduce pressure on the foreign exchange market,” he said.

He also proposed a mecha­nism under which the Treasury would exchange its foreign cur­rency tax collections for newly is­sued ZiG backed by those foreign currency holdings.

“In addition, the Treasury should consider selling its foreign currency balances (received from ZIMRA) in exchange for ZiG (which will be printed by RBZ in exchange for the USD),” he said.

Mugano argued that such an arrangement would increase the circulation of ZiG for domestic transactions while strengthen­ing the RBZ’s foreign currency reserves.

“This will create the supply of ZiG which will enable the Treasury to pay local service providers in ZiG in line with its recent announcement whilst at the same time increasing the USD reserves at the Central Bank. With this approach, we can fast-track monocurrency by 2028,” he said.

He however stressed that achieving a successful transition to a mono-currency economy required coordinated action between fiscal and monetary au­thorities instead of relying solely on the central bank.

“The RBZ alone can’t increase the supply of ZiG – we need a structured approach which is demand driven and every ZiG printed must be backed by or ex­changed with foreign currency so that we avoid runaway exchange rate and inflation,” he said.

In the same vein, Grain Mill­ers Association of Zimbabwe (GMAZ) chairman Tafadzwa Musarara said authorities should ensure that the local currency is entrenched in the local agricul­tural value chain, including pay­ments to the Grain Market Board (GMB).

“Our biggest handicap was in the acquisition of wheat from GMB which insists on 100 percent US dollars. We need the GMB to accept the local currency since it also makes payments to commodities delivered in local currency,” Musarara said.

The situation is even worse in the informal market, where most transactions are conducted in physical US-dollars.

This story first appeared on: https://fingaz.co.zw/2026/07/05/treasury-urged-to-boost-zig-demand/