At the beginning of April, Zimbabwe introduced a new currency called Zimbabwe Gold, or ZiG for short. What makes this currency special is that it’s fully backed by real, valuable assets like gold and other foreign currencies, giving it more credibility than past currencies the country has tried.
However, the ZiG is already facing challenges. Zimbabwe’s central bank governor, John Mushayavanhu, recently told Bloomberg that the new currency is struggling because of a growing gap between its official exchange rate and the rates on the parallel (black) market.
Here’s what’s happening: On the official market, one ZiG is worth 13.94 US dollars, but on the parallel market, it’s being traded for between 16 and 26 US dollars, according to ZimPriceCheck.com. That’s a big difference! Governor Mushayavanhu blames this on some traders and businesses who are hiking up the exchange rates when selling goods and services in ZiG. These traders are taking advantage of the situation to make more money, but the central bank is not happy about it.
Mushayavanhu insists that these higher black market rates don’t reflect the true value of the ZiG and warns people not to trust them. To fight this, the central bank is promising to crack down on illegal trading practices. They plan to enforce foreign exchange rules more strictly and keep a close watch on how the ZiG is being traded in both the official and parallel markets.
Despite these issues, Zimbabwe’s government is hopeful that the ZiG can help the country break away from its heavy reliance on the US dollar. President Mnangagwa has stressed the importance of having a national currency, saying that depending too much on foreign currency is risky for any country that wants to control its own economy. Zimbabwe is aiming to adopt the ZiG as its sole currency by 2030, a move they believe will boost the country’s economic independence.
Information Secretary Nick Mangwana also weighed in, saying that de-dollarizing the economy is crucial. He believes that the benefits of switching to the ZiG far outweigh the potential problems, even though some people are still worried about losing their savings or purchasing power. Mangwana thinks the government has shown enough discipline to guide the country through these changes.
The central bank is also planning to use tighter monetary policies and inject dollars into the economy to stabilize the ZiG. With the help of gold revenues and remittances from Zimbabweans abroad, they hope to keep the currency strong and reliable.
Zimbabwe’s past experiences with local currencies haven’t been great, so people are understandably cautious. However, the central bank is committed to earning back the public’s trust by stabilizing the ZiG and making it a viable currency. The country is looking to follow the lead of nations like Saudi Arabia, which has started trading oil in other currencies, to diversify its economy and reduce dependency on the US dollar.
Only time will tell if the ZiG will succeed, but Zimbabwe’s government is determined to make it work and reclaim control over its financial future.
