(Bloomberg) -- Zimbabwean Finance Minister Mthuli Ncube announced new measures to help spur demand for the nation’s bullion-backed currency, including ordering government services be paid for in the unit.
Ncube presented the plans in his mid-term budget statement before lawmakers Thursday in Mount Hampden, 11 miles northeast of the capital, Harare. He vowed to offer fresh support to the ZiG, short for Zimbabwe Gold, which he praised for subduing “inflationary pressures in the economy.” Consumer prices measured in ZiG fell 0.1% in July after remaining unchanged in June from the prior month, the national statistics agency said Friday in an online briefing.
The government was previously slammed for preferring to receive payment in US dollars, a move seen as undermining its new currency, the ZiG. The stance has also partially been blamed for leading to the demise of the nation’s former currency, the Zimbabwean dollar.
The finance minister also said he wants some taxes to be paid in ZiG, including custom duties on selected finished products, presumptive taxes and a portion of corporate taxes.
A crackdown led by the central bank’s financial intelligence unit and police to defend the ZiG from speculation on the parallel market will continue, he said.
“This exercise will continue until there is sanity and stability in the financial sector,” Ncube said.
So far, more than 500 traders and individuals have been fined for refusing to accept the ZiG, using and engaging in illegal foreign-exchange rates and activities, Ncube said.
The southern African nation replaced the Zimbabwean dollar on April 5, after it lost 80% of its value against the US dollar this year, fueling an inflation spiral. The ZiG is backed by cash and mineral reserves worth $370 million and is the nation’s sixth attempt at having a functioning local currency in 15 years.
The 2024 budget was reconfigured to ZiG from the old currency and now stands at 87.9 billion ZiG ($6.4 billion)
Other Highlights:
- The African Development Bank disbursed $7.6 million to the nation in the first quarter to support governance related activities including the implementation of an arrears clearance program.
- The government will continue making quarterly token payments to international financial institutions including the AfDB, World Bank, European Investment Bank and Paris Club creditors as a sign of commitment to engagement to be able to regain access to international capital markets, which it has been locked out of since 1999.
- Economic growth forecast for 2024 was revised down to 2% from 3.5% due to an El Niño-induced drought. Government, in partnership with the private sector is mobilizing $1.6 billion to support crop production and ensure food security.
(Updates with latest monthly inflation data in second paragraph)
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