Central Bank Urges Reporting of Non-Acceptance of ZiG

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As a researcher with a background in economics and a personal experience living through the hyperinflation crisis in Zimbabwe, I am both intrigued and cautiously optimistic about the introduction of the new Zimbabwe Gold currency (ZiG). While the backing of gold reserves and foreign currency is a positive step towards stabilizing the economy, the challenges faced by the central bank in implementing the new currency are not insignificant.

As an analyst, I would describe it as follows: Starting from April 29, 2024, I, along with other residents in Zimbabwe, have the opportunity to use a new currency called the Zimbabwe Gold (ZiG). This currency, which can be obtained in both digital and physical formats, is backed by the country’s gold reserves and foreign currency held by the Reserve Bank of Zimbabwe (RBZ).

The Zimbabwean dollar, which had been devalued prior, has been replaced by a new currency called the ZiG. According to Bloomberg’s report, each ZiG is equal to 13.56 U.S. dollars. This new currency is supported by 2.5 tons of gold and $100 million in foreign currency reserves kept by the Reserve Bank of Zimbabwe (RBZ). The RBZ anticipates that introducing the ZiG will aid in controlling inflation, aiming to decrease it significantly from more than 55% to a manageable 2% per year.

Although the Zimbabwean Dollar (ZiG) has risen by 1.9% against the US dollar since its reintroduction, the currency has encountered challenges within its own borders. The Reserve Bank of Zimbabwe (RBZ) has been actively fighting illegal foreign exchange trading and an unofficial market for the ZiG. The central bank has encouraged citizens to report any individuals engaging in illicit currency transactions and businesses that refuse to accept the Zimbabwean Dollar.

Law enforcement agencies have apprehended 224 individuals for engaging in unlawful Foreign Exchange (FX) trading, seized control of 90 suspected bank accounts, and penalized 40 people as part of a campaign to curb illegal ZiG transactions. Additionally, there has been a shortage of coins leading the Reserve Bank of Zimbabwe (RBZ) to focus on expanding the circulation of smaller denominations.

Starting from June 10, the Reserve Bank of Zimbabwe (RBZ) has enabled cash withdrawals using debit cards at Homelink financial services in seven cities to enhance the convenience of using ZiG. However, it is important to note that failure to transact at the official ZiG/USD exchange rate set by the government may result in fines.

Zimbabwe’s recent introduction of the ZiG represents the nation’s sixth attempt in the past 15 years to create a reliable local currency. Unfortunately, earlier efforts were undermined by the government’s practice of printing money to fund its expenses, resulting in plummeting values relative to the US dollar.

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2024-06-05 03:16