Faith Nyasuguta
Zimbabwe’s latest monetary endeavor, the introduction of a new gold-backed currency known as ZiG, commenced trading this week, amid considerable challenges faced by businesses adjusting to the nation’s persistent attempts at economic stabilization.
The Reserve Bank of Zimbabwe launched ZiG on Friday, aiming to counteract economic instability and safeguard citizens against currency fluctuations and soaring inflation rates.
Initially valued at 13.56 to $1, ZiG replaces the depreciated Real Time Gross Settlement Dollar (RTGS), which plummeted to 28,720 to $1 before the transition, as reported by Reuters.
Over the weekend, bank balances underwent conversion into the new currency, with customers allotted a 21-day window for the exchange. ZiG banknotes, featuring denominations of 1, 2, 5, 10, 50, 100, and 200, are scheduled to enter circulation by the month’s end, as announced by the Reserve Bank of Zimbabwe.
The adoption of the RTGS in 2019 followed a decade of dollarization, marked by the issuance of bond coins and notes.
Despite previous efforts to stabilize the currency, dwindling public trust and this year’s depreciation, with annual inflation exceeding 55% in March, have raised concerns about a potential resurgence of hyperinflation experienced during Robert Mugabe’s presidency.
Commercial banks have initiated the use of the new official exchange rate. However, uncertainties persist regarding the sustainability of ZiG. Although the central bank asserts that ZiG is “structured” and backed by a composite basket of foreign currency and precious metals, primarily gold, doubts linger regarding its acceptance by businesses and citizens.
According to data from the central bank, foreign currencies continue to dominate approximately 80% to 85% of transactions, casting doubt on ZiG’s potential to serve as a reliable medium of exchange and store of value in the eyes of the populace.
Zimbabwe’s introduction of ZiG represents another attempt to stabilize the nation’s tumultuous economy. However, its success hinges on overcoming widespread skepticism and ensuring widespread acceptance among businesses and citizens alike, amidst ongoing concerns about the country’s economic future.
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