HARARE (Askume) – Zimbabwe’s new currency is under pressure just five months after its launch as rising food imports deplete foreign reserves and it could become the only currency on the market by 2026. The plan is in jeopardy.
The gold-backed ZIG, which stands for Zimbabwe Gold, is the country’s sixth stab at a stablecoin in 15 years. It was launched in April at 13.6 ZIG per dollar and has since lost nearly 80% of its value on the black market.
The country’s central bank said on Thursday it had injected $64 million into the foreign exchange market this month to meet demand for U.S. dollars.
Central Bank Governor John Mushaivanhu said: “Over the past few weeks, the central bank has observed an increased demand for foreign exchange from banks, reflecting a temporary imbalance in foreign exchange supply and demand, which is putting pressure on the foreign exchange market.”
This situation persists despite the Reserve Bank of India providing $50 million in July, he said, adding that the bank will continue to intervene as needed to ensure ZIG’s stability.
Independent economist Prosper Chitambara said the depreciation reflected a lack of confidence in the new currency and local reluctance to adopt it.
Persistence Gwanya, a member of the Reserve Bank of Zimbabwe’s monetary policy committee, told Askume that despite the slow pace, it was too early to consider the new currency a failure.
Gwanya said the government could increase the use of the zizi by levying higher taxes on the local currency. “The government should give more priority to the domestic currency than any other government and needs to intervene immediately to bring more foreign currency into the market,” he said.
But market traders disagree.
“ZiG is getting weaker, so doing business with it is not a business idea. I don’t trust ZiG. We used to come here with Zimdollar Been,” said Maynard Maketo, a vendor selling sweets and recharge cards.
According to exchange rate tracking website Pricecheck, ZiG is worth between 20 ZiG and 26 ZiG per US$1 on the black market, and 13.9 ZiG per US$1 on the official exchange market.
Carol Munjoma is a grocer in central Harare who trades only in US dollars.
The mother of two said: “The place I buy these groceries from does not accept ZiG. So to protect my business I charge in US dollars. ZiG needs to be stable to be accepted here.”
In July, central bank governor Mushayavanhu told Askume that authorities would stick to their commitments to build confidence in the new currency, a sentiment echoed by Gwanya.
“It’s too early to think that Zig is dead,” Gwanya said.
