PREVIEW
The collapse in the value of the gold-backed currency by over 40% against the dollar could spell the end for the country’s sixth new currency in 25 years
The Zimbabwean government’s latest attempt to discourage citizens from using US dollars appears in danger of collapse after the central bank’s decision to devalue its gold-backed currency, the Zimbabwe Gold (ZiG), by over 40% against the dollar.
The move had become inevitable after large retailers warned that they would have to close if the rate remained fixed at the previous level. President Emmerson Mnangagwa’s Treasury had resorted to efforts to artificially stimulate demand, including by authorising the payment of 50% of all tax in ZiG, regardless of the currency of trade (AC Vol 65 No 17, Dollars still dominate the economy despite the launch of the ZiG).
That helped ensure that the ZiG had largely maintained its official value since its 8 April launch, but on the black market, where most businesses obtain dollars, it has already more than halved in value (AC Vol 65 No 9, Shaky new ZiG money undermines IMF talks).
However, neither that nor Mnangagwa’s remarks in July that Zimbabwe would de-dollarise and switch to a ZiG economy by 2030 has persuaded the business community that ZiG is a viable currency, and the collapse in its value could spell the end for Zimbabwe’s sixth currency in 25 years.
Despite being backed by gold, ZIG is essentially a digital currency since almost all ZiG transactions are by card or mobile payment, an attempt to copy Kenya’s M-Pesa network which has captured the mass market and made cash largely obsolete (Dispatches 28/2/22, Nairobi bankers want to keep their high-tech edge as government mulls more borrowing).
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