By : Lloyd Mahachi
Zimbabwe’s gold-backed currency, the ZiG, has faced significant challenges since its introduction six months ago, losing nearly half its value and prompting the central bank to devalue it by 43%. Launched in April to stabilize the country’s economy and reduce dependence on the US dollar, the ZiG’s struggles have raised concerns about Zimbabwe’s ability to establish a trusted local currency.
The country has been battling hyperinflation since 2007, leading to the abandonment of the Zimbabwe dollar (Zimdollar) in 2009. At its peak, the Zimdollar had become one of the world’s worst-performing currencies, with an inflation rate of 79 billion percent. The US dollar subsequently became the primary currency, and the government introduced the ZiG to tackle skyrocketing inflation.
Despite being anchored on gold reserves, the ZiG has failed to win confidence. Its value has dropped from 13.56 ZiG to the US dollar at its launch to 27 ZiG this week. Moreover, the black market rate is even higher, with the ZiG trading at 40-50 to the US dollar. Local businesses have warned authorities that they will close if the rate differences are not addressed, highlighting the urgent need for stabilization.
Experts attribute the ZiG’s depreciation to the multicurrency system, advising against rushing to make the system a monocurrency. The Bankers Association of Zimbabwe president, Lawrence Nyazema, believes the devaluation was necessary but emphasizes the need to convince citizens of the currency’s stability. This sentiment is echoed by the Reserve Bank of Zimbabwe (RBZ) Governor, John Mushayavanhu, who described the devaluation as a “manifestation of what was already happening on the market.”
However, the government’s aim to use only the ZiG by 2026 has raised concerns among experts, warning that rushing this process could cause further hardships. The ZiG’s struggles have left many Zimbabweans skeptical, with some exchanging the currency for US dollars due to fears of a repeat of the 2009 hyperinflation crisis.
The country’s 16 million people continue to experience hardships, with many relying on aid. The ZiG’s fate remains uncertain, with some government agencies losing confidence in the currency. To regain public trust, the government must stabilize the local currency and increase its usage. The RBZ’s next moves will be crucial in determining the ZiG’s success or failure.
The ZiG’s performance has significant implications for Zimbabwe’s economic recovery. A stable currency is essential for attracting foreign investment, promoting economic growth, and improving living standards. Therefore, addressing the underlying issues affecting the ZiG’s value is critical.
Zimbabwe’s gold-backed currency faces significant challenges in gaining traction. Addressing the multicurrency system, stabilizing the currency, and increasing public confidence are essential steps towards establishing a trusted local currency.
Editor : Josephine Mahachi
