Zimbabwe’s new currency, the Zimbabwe Gold (ZiG), introduced in April 2021, backed by gold and foreign reserves, is facing challenges as it struggles against depreciation just five months after its launch. The government’s attempt to ditch the US dollar and control the foreign exchange rate has not been as successful as hoped, leading to concerns about the future stability of the currency.
Market watchers and economists, including President Mnangagwa’s advisor Eddie Cross, are warning that without immediate interventions, the ZiG may follow the same path as the defunct Zimbabwe dollar. Despite efforts to shore up the currency, including fines for businesses not using the new currency, the parallel market exchange rate is now pegged at ZiG24 to $1, compared to the official rate of ZiG14.5 to $1.
Concerns about mismatches between local currency and US dollar revenues, as well as challenges in accessing foreign currency on the official market, are complicating the situation for businesses in Zimbabwe. The Confederation of Zimbabwe Industries (CZI) has highlighted the risks associated with a widening gap between the official and parallel market rates, which could fuel inflationary pressures. Moving forward, the government will need to address these issues to secure the future of the ZiG and rebuild confidence in the currency.
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