Leading retailers in Zimbabwe have cautioned that they may be forced to shut down stores if the government continues to mandate the use of an official exchange rate they believe is inflated and harming their ability to compete.
The country’s new gold-backed currency, the Zimbabwe Gold (ZiG), has come under strain just five months after its introduction, losing nearly 80% of its value on the black market, where it trades between 20 and 26 ZiG per US Dollar.
Official regulations require formal retailers to price goods using the fixed exchange rate of 14.8 ZiG per Dollar, with the risk of fines for non-compliance.
However, retailers such as OK Zimbabwe, Spar, and TM Supermarkets, a local subsidiary of South Africa's Pick N Pay, contend that the overvalued official exchange rate is making their products more expensive compared to informal shops, leading to a loss of customers, Reuters news agency reports.
“The situation is clearly untenable and will lead to company closures if authorities do not intervene with policy measures to protect the formal retail sector,” Retailers Association of Zimbabwe (RAZ) said in a letter sent to the Ministry of Finance and seen by Reuters.
Furthermore, the retailers explained that although they are obligated to comply with the official exchange rate set by authorities, their suppliers are charging black market rates, which forces them to raise prices.
“Implementing a pricing model that reflects real-time market exchange rate fluctuations can help us remain competitive while managing costs,” the retailers stated.
The ZiG marks Zimbabwe's sixth attempt at establishing a stable currency in the past 15 years, and economists argue that its devaluation reflects a lack of public confidence in the new currency.