By Nyasha Chingonu
HARARE (Reuters) – Five months after its launch, Zimbabwe’s new currency is under pressure as foreign reserves are eroded by rising grain imports, putting at risk the government’s plan to make it the sole currency on the market by 2026.
Zimbabwe’s gold-backed Zig is the country’s sixth attempt at a stable currency in 15 years. Launched in April at 13.6 Zig to the US dollar, it has since lost nearly 80% of its value on the black market.
Independent economist Prosper Chitampara said the devaluation indicated a lack of confidence in the new currency, which locals were reluctant to accept.
Despite the slow uptake, it is too early to call the new currency a failure, Persistence Gwanyanya, a member of the Reserve Bank of Zimbabwe’s monetary policy committee, told Reuters.
The government could increase the use of the local currency by levying more taxes in the local currency, said Gwanyanya. “The government more than any other government should show its preference for its local currency and urgent intervention is needed by injecting more foreign currency into the market,” he added.
But market participants are not convinced.
“Zig has become weaker so it doesn’t make business sense to trade it. I don’t trust Zig. We’ve been through this before with Zimdollar,” said Maynard Makito, a street vendor selling sweets and recharge cards.
According to the Price Check website, which tracks the exchange rate, the zig is trading at between 20 and 26 zig to the dollar on the black market, and 13.9 zig to the dollar on the official exchange.
Carol Mungoma, a food vendor in downtown Harare, deals exclusively in US dollars.
“Where I buy these groceries, they don’t accept ZiG. To protect my business, I get paid in US dollars. ZiG has to be stable to be accepted here,” says the mother of two.
In July, central bank governor John Mushayavano told Reuters that authorities would stick to their promises to build confidence in the new currency, an assertion echoed by Gwanyanya.
“It’s too early to think this could be the death of the marriage,” Guanyin said.