The government’s goal to have Zimbabwe’s new currency the only one in the market by 2026 is in jeopardy five months after it was introduced because rising grain imports are depleting foreign reserves.Sept. 19, HARARE (Reuters) Five months after its launch, Zimbabwe’s new currency is under pressure as increased grain imports eat away at foreign reserves, putting at risk the government’s plan to make it the only currency in the market by 2026.
The gold-backed ZiG, which stands for Zimbabwe Gold, is the country’s sixth attempt at a stable currency in 15 years. It was introduced in April at a rate of 13.6 ZiG per U.S. dollar and has since lost almost 80% of its value on the black market.
Independent economist Prosper Chitambara said the devaluation pointed to a lack of confidence in the new currency that locals have been reluctant to embrace.
Reuters was informed by Persistence Gwanyanya, a member of the Monetary Policy Committee of the Reserve Bank of Zimbabwe, that despite the slow adoption rate, it was premature to declare the new currency a failure.
According to Gwanyanya, levying more taxes in local currency would encourage more people to use the ZiG. “Government more than any other should show preference for its own currency and there is need for urgent intervention by injecting more foreign currency on the market,” he said.
But market traders are not convinced.
card: It is not a wise business decision to transact with the ZiG since it has been getting weaker. I do not trust the ZiG at all. Maynard Maketo, a street vendor selling candies and recharge cards, remarked, “We have been here before with the Zimdollar.”
According to Pricecheck, a website that tracks the exchange rate, the ZiG is trading between 20 ZiG and 26 ZiG to $1 on the black market and 13.9 ZiG to $1 on the official exchange.
Carol Munjoma, a trader in downtown Harare who sells groceries, transacts exclusively in U.S dollars.
“Where I buy these groceries, they do not accept ZiG. So to protect my business I charge in U.S dollars. The ZiG would have to be stable to be accepted here,” the mother of two said.
Gwanyanya agreed with central bank chief John Mushayavanhu’s July Reuters statement that authorities would honor their pledges to foster confidence in the new currency.In July, central bank chief John Mushayavanhu told Reuters that authorities would stick to promises to build trust in the new currency, a sentiment echoed by Gwanyanya.
“It is too early to consider that this may be the death of the ZiG,” said Gwanyanya.
(Reporting by Nyasha Chingono; editing by Kopano Gumbi and Christina Fincher)
