Zimbabwe’s new currency ZiG used in 20% of local transactions

ZIMSPHERE 

HARARE – Zimbabwe’s latest currency, the Zimbabwe Gold (ZiG), is currently used in 20% of local transactions, with 80% of transactions still conducted in foreign currencies. Trust in the new currency remains low, and there are shortages of ZiG in the market.

A cashier dispenses the new $10 ZiG, short for Zimbabwe Gold, banknote from a till as change in Harare on April 30.Photographer: Jekesai Njikizana/AFP/Getty Images

Despite government efforts to build confidence in the ZiG, most Zimbabweans continue to prefer foreign currency for their purchases. The government maintains that the ZiG will remain backed by reserves, which is seen as the only way to build trust in the currency.

Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu told Reuters that the government is committed to building trust in the ZiG by refraining from printing money to finance government spending, a practice that has previously led to currency collapses. 

“Confidence can only come from us walking the talk,” Mushayavanhu said.

He elaborated that the government has a plan extending to 2030 to increase the use of the ZiG and build up gold and foreign exchange reserves. 

When the currency was launched, reserves stood at $285 million and have now exceeded $380 million.

Despite this, the ZiG is currently used in about 20% of local transactions, compared with 80% for foreign currencies.

“We want to gradually tilt that ratio to 70:30 by year-end or 60:40 thereafter, until we get to a situation where everybody is indifferent as to which currency they are using. This is the roadmap,” Mushayavanhu assured.

Although the government has consistently promoted the stability of the ZiG, shortages of the currency in shops remain a significant concern. 

These shortages hinder the adoption of the ZiG for daily transactions, especially for small transactions equivalent to less than US$1. 

Mushayavanhu stated that enough ZiG notes had been printed to meet public demand and that the bank's reserve accumulation strategy could accelerate as commodity prices rise. 

To address the liquidity challenges, the central bank in June introduced an arrangement with Homelink, allowing citizens to swipe for ZiG cash.

The central bank has been converting royalties paid by mining companies into gold and is targeting 3 tons of gold in its reserves by year-end, up from 2.5 tons in April.

The ZiG was launched on April 5, 2024, as Zimbabwe's new currency, marking the country's sixth attempt at a local currency in 15 years following a period of hyperinflation under former leader Robert Mugabe. 

It replaced the Zimdollar, which had been severely affected by inflation, falling 80% in the three months before it was scrapped; and apparently, it has been a Herculean battle for the authorities to convince a skeptical population to adopt the ZiG and move away from foreign currencies.