• Since inception, ZiG has demonstrated stability on formal market
  • However, it continues to suffer some setbacks on the parallel market
  • What can be done to stabilise ZiG

Harare- Zimbabwe's latest introduced gold-backed currency, the Zimbabwe Gold (ZiG), has demonstrated stability on the official market since its inception, maintaining its value for almost a month. On the 26th of April 2024, today, the ZiG traded at a rate of ZiG13.4218 against the US dollar, experiencing a slight decline from ZiG13.3437, which further highlights its strength in the formal market.

Currently, ZiG is the most powerful currency in Southern Africa Development Committee, demonstrating strength against the South African Rand trading at ZAR18.98, Zambian Kwacha at ZMW26 and the Pula at BWP13.8.

The ZiG currency is supported by reserves consisting of US$100 million and 2.5 tonnes of gold valued at US$185 million. This substantial backing instils confidence in officials that the ZiG will restore economic stability and effectively address price inflation.

Barely a decade, Zimbabwe has introduced various currencies with different names such as the Bond, RTG, ZWL, and now the ZiG. These reserves, totalling US$285 million, are expected to stabilize the currency and maintain consistent pricing, ultimately promoting economic growth

In the parallel market, the ZiG is currently trading at approximately 17 to 18 against the US dollar, while peer-to-peer transactions are occurring at a rate of 16.5 to 16.8. This indicates that the currency has experienced a devaluation on the parallel market due to an influx of electronic money compared to limited US dollar availability.

Despite the introduction and positive reception of the ZiG currency, the US dollar remains the primary currency in Zimbabwe. The government has not yet fully embraced the ZiG for transactions such as passport fees, licenses, fuel purchases, and various taxes, which are still exclusively payable in ZiG.

This indicates that the government, like the general population, still places significant trust in the US dollar. The US dollar also continues to be the preferred currency for durable goods, medical bills, and fees nationwide.

To instil confidence in the ZiG currency, it is crucial for the government to promote its use across all government agencies, including fuel procurement. It is worth noting that some influential politicians have investments in the fuel business, and if the government does not encourage the use of ZiG in these transactions, it could lead to an increased demand for US dollars, potentially causing inflationary pressures on the ZiG.

The Bond currency, which was backed by US$200 million from Afreximbank, faced instability due to excessive money printing which promoted the US dollar.

The latest ZiG currency is similarly backed by US$285 million, and caution must be exercised to avoid repeating the mistakes that led to the instability of the Bond, including quasi-fiscal operations and imprudent fiscal policies driven by a relentless appetite for money printing and the promotion of the US dollar.

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