Zimbabwe's New Currency ZiG Struggles Domestically Despite Global Success
Summary:
The Zimbabwe Reserve Bank (ZRB) has launched a new currency, Zimbabwe Gold (ZiG), which has garnered a mixed response and faces difficulties domestically despite performing well on international foreign exchange markets. The ZRB has issued public appeals for citizens to report illegal currency traders, and is taking measures to make smaller denominations more accessible. ZiG, backed by gold and foreign currency, began as a digital entity and was introduced as a physical currency in April. Despite these series of events, several foreign currencies still maintain their legality in Zimbabwe.
Zimbabwe Gold (ZiG), a recently introduced currency that was derived from a gold-supported token, has been showing robust performance in the international exchange arena, though it struggles domestically. The Zimbabwe Reserve Bank (ZRB) declared fresh actions to suppress the illicit market of the currency and bolster its domestic utility on June 4. The ZRB issued public calls via their X account, asking citizens to report illegal traders or businesses refusing to adopt the new currency. This push is part of an ongoing fight against unlawful foreign currency transactions, often carried out at unofficial rates. Bloomberg has reported a 1.9% increase in the ZiG against the US dollar since it became available in tangible form.
The launch of the ZiG has seen a mixed response. On May 15, Crime Watch Zimbabwe, based in South Africa, announced that 224 illicit foreign exchange traders were apprehended in Zimbabwe, and the RBZ Financial Intelligence Unit (FIU) blocked 90 bank accounts and penalized 40 individuals. The FIU was also scrutinizing banking activities for signs of unlawful ZiG transactions.
According to Copperbelt Katanga Mining/LinkedIn, the organization highlighted that the crackdown triggered “a noticeable decrease in illegal currency vendors in the Central Business District (CBD) [of Harare] and nearby areas.” Clearly, the struggle against these activities persists, as evident from the RBZ X post on June 4.
Another setback for the central bank is the apparent shortage of coins. “The bank aims to make smaller denominations widely accessible across the economy, namely ZiG1, ZiG2, ZiG5, ZiG10,” stated the RBZ in an X post few hours after their announcement on illicit traders. The RBZ further declared that physical ZiG cash can be withdrawn from Homelink, a government-run financial service provider, using debit cards starting from June 10 in seven cities, with plans to roll out the service in other financial institutions in the future.
ZiG, being Zimbabwe's sixth attempt at introducing a currency in 15 years, has met mixed public reactions. Initially a digital currency anchored to the price of gold, it is supported by gold and foreign currency. It later entered the physical realm in April. Derived from the previously termed gold-backed digital token (GBDT), the token was treated with skepticism and backlash, owing to its likeness with central bank digital currency. Its role has since evolved into an investment instrument, distinct from the physical ZiG. In spite of the introduction of ZiG, several foreign currencies are still valid for use in Zimbabwe.
[source: The Zimbabwean Patriot]
Published At
6/4/2024 10:55:27 PM
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