Few countries globally have been bedeviled by currency woes more than Zimbabwe. In the past two decades, the Southern African country has tried five currencies, but none has made its mark. The latest attempt is the Zimbabwe Gold, or ZiG, with the government promising the people that this time, it will be different.
Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu recently unveiled the new version of ZiG, with trading set at 13.56 against the U.S. dollar. Once it hit the open market, the forces of demand and supply would determine the rate.
ZiG suffered a chaotic start, with most banks and digital payment platforms were not ready for the switch. On Tuesday, most banks in the country went offline to work on transitioning to the new currency.
Zimbabweans bore the brunt of the sudden currency switch, with thousands queueing for hours in banking halls.
“I spent the entire morning… waiting for the bank to be back online. No success. Stranded. They say they have no idea when they will be back online,” one local lamented.
Just like the Nigerian crisis where the central bank overestimated its ability to transition the country and plunged it into a cash crisis, most Zimbabweans were unable to access the new ZiG notes, local outlets report.
The existing Zimbabwean dollars, which have been losing value against the U.S. dollar every day for months, became worthless overnight. In some cities, children were spotted playing on the streets with bundles of the ‘worthless’ cash.
Merchants and stores ceased accepting the old notes as thousands rushed to purchase items to get rid of these notes. Public transportation also rejected the old notes, leaving thousands stranded.
There will be more pain in the coming weeks, with the new ZiG notes expected to enter circulation on April 30.
Zimbabwe’s unending currency woes
ZiG is the sixth attempt by the Southern African nation to find a solution to its currency troubles, stretching back over 15 years.
In 2008, Zimbabwe’s inflation hit a staggering 500 billion percent, according to the International Monetary Fund (IMF). To combat the inflation, the country turned to the U.S. dollar and later the South African rand.
In 2016, the central bank introduced a new currency called the bond note, backed by the USD loan facility. It promised the citizens the bond note would hold its value against the greenback. However, it wasn’t long before excess cash printing saw the currency take a nosedive.
Three years later, in 2019, the country reverted to the Zimbabwean dollar. As predicted by many, it failed. Inflation has persisted, hitting 55% in March amid several weeks of consecutive loss of value for the currency.
As the new iteration of ZiG launches, the RBZ says this time, it will do better. The new currency is backed by $100 million in foreign currency and 2,522 kilograms of gold reserves worth $185 million.
While Governor Mushayavanhu focuses on reassuring the citizens that the new currency will cure all the ills, the biggest battle he faces is restoring faith in his institution. After decades of broken promises on the state and rate of currency printing, Zimbabweans are not quick to believe the governor, a local economic expert told the BBC.
“We now end up in the same place where we started—where assurances are being given to the market that the government will live within its means. The political culture has not changed—the critical point is discipline on the part of the authorities,” Godfrey Kanyenze opined.
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