HARARE (Reuters)

Top Zimbabwean retailers have warned of potential store closures if the government insists on using an official exchange rate they deem overvalued, which damages their competitiveness.

Five months after its launch, Zimbabwe’s new gold-backed currency, ZiG (Zimbabwe Gold), is under pressure and has lost almost 80% of its value on the black market, where it trades between 20 and 26 ZiG to $1.

Official guidelines require formal retailers to set prices based on the official exchange rate of 14.8 ZiG to $1 or face fines.

However, retailers, including OK Zimbabwe, Spar, and TM Supermarkets (a local unit of South Africa’s Pick N Pay), argue that this overvalued rate is making their products more expensive than those in informal shops, driving away customers.

The Retailers Association of Zimbabwe (RAZ) noted in a letter to the Ministry of Finance that the situation is untenable and could lead to company closures if authorities do not intervene with policy measures to protect the formal retail sector.

Despite being required to adhere to the official exchange rate, retailers state that their suppliers charge black market rates, forcing them to hike prices.

“Implementing a pricing model that reflects real-time market exchange rate fluctuations can help us remain competitive while managing costs,” the retailers said.

The treasury could not be immediately reached for comment.

The ZiG is the country’s sixth attempt at establishing a stable currency in 15 years, and economists indicate that its devaluation reflects a lack of public confidence in the new currency.