Legal Discussions with Vengai Madzima: Mono Currency and Monetary Policy Consultations

NewZimbabwe.com has invited Mr Vengai Madzima, the Senior Partner at Madzima Chidyausiku Museta Legal Practitioners (MCM Legal), to discuss legal issues affecting Zimbabweans. The discussions are of a general nature and those seeking specific legal advice should contact their lawyer.

 Reporter: Welcome back Mr Madzima. This week, we want to discuss the consultations you had with the Governor of the Reserve Bank of Zimbabwe through the CEO Roundtable regarding monetary policy and the path to a mono–currency. What was the major take-home from the discussion? 

VM: Thank you.

I was privileged to be a part of a panel of members that represented the CEO Roundtable at the monetary policy consultations hosted by the Governor and his team. Allow me to clarify at the outset that the takeaways I will speak on from the meeting reflect my views and do not represent those of the CEO Roundtable.

It is fair to start by acknowledging the positives that have been achieved by the Reserve Bank under the sitting Governor, since around April 2024. Naturally, we may have a few points of departure on how the positives were achieved, the overarching point being that they were achieved.

The question of whether or not Zimbabwe should eventually transition to a mono-currency is a moot point, as a mono-currency allows a country monetary sovereignty, allowing it to tailor its policies to its needs. The real question is how do we adopt or transition to a mono currency and that is where the point of departure is.

Some captains of industry advocate for the monetary status quo to remain as is for a sustained period, under a dual or multi–currency system for an indefinite period, to allow recoveries from the losses made in the hyperinflationary years, others accept that the adoption must happen,  but in a structured way that is market led and then they are those who are of the view that once the structures to sustain a currency are in place, the transition should be administered at Reserve Bank or Government level.

The monetary policy must then balance these competing interests.

Reporter: The mono-currency issue is of interest to all Zimbabweans. Before going deeper into it, what positives have been achieved so far by the Reserve Bank?

VM: To answer the question, we have to understand what the role of the Reserve Bank is in terms of our law. Its job or mandate is to maintain price stability, formulate and execute monetary policy and a stable financial system.

Any assessment of the Reserve Bank’s achievements has to be made within the context of its mandate, that is, whether or not we have witnessed exchange rate and price stability. The exchange rate fluctuated between 1:25 and 1:27 in 2025 on the official market, which is relatively stable if we consider where we came from as an economy.

Inflation in 2025, on the other hand, was below 20% with a month on month inflation averaging around 0.4% and total inflation dropping to 4.1% in January, 2026,  the lowest it has been since 1997, which is also commendable. What this means in layman’s terms is that when visiting the shops in 2025, we could predict almost to the dollar what the cost of an article would be, that is, both in the United States Dollar and the Zimbabwean Dollar.

Long and short, we witnessed deflation in the economy, which is partly a result of a tight money supply policy. Deflation is welcome, if we look at it in the context of our hyperinflationary history, but sustained deflation has negative consequences for businesses, especially businesses in the production sectors.

The positives in my view will increase if the Reserve Bank, in its monetary policy, addresses the issues relating to costs of borrowing and transacting with money, be it the Zimbabwe Gold currency or the United States Dollar. These costs remain extremely high, making it unviable for business or private borrowers and more difficult for mortgage seekers.

Reporter: Back to the mono currency issue, are there indications of when the Reserve Bank may intend to introduce this mono currency?

VM:  From the discussions during the consultation, the Governor was very clear that the mono currency would be introduced once the traceable condition precedents have been met. In other words, the fundamentals that enable currency stability have to be in place before it can be introduced.

He didn’t indicate a time period per se, although it is conceivable that he would want to achieve that during the currency of his term. However, what is clear is that he wants the conditions precedent that will ensure a stable currency to be in place first, be it before 2030 or after 2030, then the country will transition back to a mono-currency

Reporter: What are some of the conditions precedent and what is your view on whether or not they are sufficient to enable such a transition?

VM: I think the condition precedents proposed by the Reserve Bank are similar to the conditions the market has requested in the past, when there were attempts to reintroduce a mono currency system.

What is critical is that the bank and the industry agree that the conditions precedent to the introduction of a mono currency have not been met as yet, although there are notable achievements towards that objective.

Some of the conditions, which the industry referred to before as market fundamentals, include having adequate foreign exchange reserves. Currently, reserves are around $1.2 billion, representing 1.5 months of import cover, which is notable if we compare to the figure of $285 million prevailing in April 2024.

The other conditions include there being an efficient foreign exchange market system, exchange rate stability, which we have witnessed, albeit being a result of tight money supply among other reasons, stable macro conditions and the Reserve Bank upholding corporate governance standards.

The most critical condition precedent, in my view, will be the increase in the demand for the ZIG currency by the market. The monetary policy should aim at restoring trust and credibility between the Reserve Bank and the currency users.

Reporter: Thank you, Mr. Madzima. We have to end here because of our time.

VM: Thank you.

• Legal Discussions with Vengai Madzima: Buying Properties without Relevant Permits
• Legal Discussions with Vengai Madzima: Setting Up a Business in Zimbabwe
• Legal Discussions with Vengai Madzima: Sustainable Infrastructure Development  

You can contact Vengai Madzima on vengai@mcmlegal.co.zw or at www.mcmlegal.co.zw.

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