The Zimbabwe ZiG currency has held quite well since it was launched a few months ago. The USD/ZIG pair was trading at 13.70, according to the Zimbabwe Central Bank data. This price is a few points above where it started trading at 13.13 on April 13th.
Latest Zimbabwe ZiG news
The Zimbabwe ZiG has remained in the spotlight in the past few months as proponents and critics watch its performance. To a large extent, the currency has done well as its attempts to move above 14 have found substantial resistance.
There have been several important ZiG news recently. First, the central bank has continued to boost its gold holdings in the past few months. In a recent statement, the bank’s governor noted that it had increased its gold holdings by 30% since April.
The governor hopes that this increase will continue this year and reach 3 tons. Its current gold holdings are worth about $370 million. He said:
“These have been increased through royalties that we are collecting from mining companies, we are making steady progress. By the time we get to the end of the year we should be talking of no less than three tons of gold.”
The new central bank governor hopes that the currency will continue holding steady in the coming years because of these reserves. As a result, the government expects that it will be the sole currency before the planned estimate of 2030. The president has also hinted that he wants it to be the main currency by 2026.
Second, the other Zimbabwe ZiG news is that it has received a stamp of approval from the International Monetary Fund (IMF). In June, a team of the agency visited the country and praised its currency and the stability it has brought. The team said:
“The mission welcomes improvement in monetary policy discipline and recommends further refinements to the policy framework. Price stability would be best achieved by stabilizing the ZiG nominal exchange rate against a suitable basket of currencies.”
Most importantly, the governor has ruled out printing more currencies to fund the budget as it has done in the past. This cash printing has often led to more supply, high inflation, and a currency devaluation.
Concerns about Zimbabwe ZiG continues
The Zimbabwe ZiG has done well, helping to stabilize the economy, with the economy expected to grow by 5.3% this year. Inflation has also stabilised and the IMF expects that it will remain at 7% this year.
The ZiG has stabilised because of its rarity, with most people having never seen it. As such, some analysts note that this stability has happened because it has become unavailable to users in the country.
Also, the central bank has continued to crack down on street traders who it believes have helped to devalue the other currencies. Instead, the bank has decided to increase transparency by publishing the official exchange rate on its website.
These street traders have now been forced out of the market, fearing long prison sentences. Instead, they have moved to smartphones to avoid detection by authorities.
The Zimbabwe ZiG faces numerous challenges ahead. For one, it will need to move from the grip of the US dollar, which is used in over 80% of all transactions.
Most people in Zimbabwe believe that the greenback is their best currency to use and save. Besides, many of them have seen their savings wiped out after the other versions of the local currency imploded. Pushing these people to use or save the new Zimbabwe currency will not be easy.
The most recent collapse was the RTGS based Zimbabwe dollar, which fell by over 60% this year. Before that, Zimbabwe had four other currencies, most of which collapsed, leading to substantial inflation levels.
Zimbabwe ZiG is a big experiment
As I have written before, the other risk is that Zimbabwe is running a big experiment that has not been tried in the past. No country right now has backed its currency to gold and the US dollar.
Instead, places like Hong Kong and Bahrain have pegged their currencies to the US dollar. Over the years, these countries have been forced to intervene when the currencies moved to extreme levels. In 2023, Hong Kong authorities intervened several times as the currency weakened.
It is unclear whether Zimbabwe will be able to defend the ZiG currency when it becomes the de factor currency in the country.
Recent data shows that the ratio of US dollars used in the economy has fallen from 85% earlier this year to 80%, a move that the central bank will appreciate. Nonetheless, the 80% level is still substantially higher than most countries. In a recent statement, the head of the Banker’s Association said:
“We committed to coming up with a roadmap which would lead us to having a mono-currency by 2030. The pace can be expedited if we manage ZiG inflation and build reserves.”
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