Last Tuesday, Zimbabwe introduced a new currency in the form of banknotes and coins — the ‘Zim Gold’ or ZiG — replacing the “worthless” RTGS dollar. Backed by $575 million worth of hard assets, the Zig hopes to combat economic distress and hyperinflation. However, despite optimistic voices, Zimbabwe’s Stock Exchange (ZSE) saw a startling 99.95% plunge just a few hours after the currency’s initial circulation, deeming investors longing for refuge under its once “price haven” hopeless.
The Zig is Zimbabwe’s sixth attempt to introduce a functioning circulatory currency, but its wavering history of failed monetary management may speak for the efficacy of this attempt. The first Zimbabwean Dollar, introduced in 1980, was worth more than the US dollar. Yet the nation was soon caged into an all-time low in 2008, going as far as injecting the 100 trillion-dollar banknote into circulation. Subsequently, high inflation rates were perpetuated throughout the 20th and 21st centuries.
Given this, it is understandable that Zimbabweans do not bear hope in the Zig. Emmerson Mnangagwa, recently re-elected president in 2023, has promised to “stabilize the dollar and the economy” since 2017. However, his leadership has been distinctively typified by hyperinflation. With growing discontent towards living conditions, rigging accusations against elections, and winning only 4% in the majority over the competing party, Mnangagwa is troubled over the populace losing faith in his presidential status.
The Zimbabwe African People’s Union (ZAPU) national spokesperson corroborates this. The Zig “aids the State-run, enabling the establishment of Zimbabwe as a spoils-centered and patrimonial society.” Mnangagwa may be attempting to paint a trustworthy image of his government, however, in doing so, glosses over tensions that may poke its fragile economy into further fragments.
Jonathan Gandari, Chief Director at Zimbabwe Media Commission, extends concerns to the personal gains of Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu. Gandari recounts a materializing trend that “every new governor is determined to see his signature on banknotes to feel relevant enough to be inducted into the small hall of fame,” adding that “it has become the norm where everyone [governor] comes with a new currency.” ZAPU goes on to call Mushayavanhu outright “clueless on bring[ing] practical solutions to the Zimbabwean economy” as he is “foisting upon people that have long lost faith in the state.”
Sylvia Dhliwayo, a market stall trader, and mother of four children, is also worried. Before the Zig, Sylvia could buy a bag of peanuts for Z$2,500. However, after RBZ gave Zimbabweans 21 days to convert their cash into Zig, the same packet spiked to Z$40,000. “They gave us no warning. We save and save their useless money and overnight the notes are worthless,” she exclaims. Likewise, companies are required to pay 50% of their quarterly taxes in Zig, but such requests are unyieldingly demanding as 80% of transactions in Zimbabwe were still made in US dollars as of March 2024.
Overbearing policies and the untransparent nature of the Zig have pushed transactions onto the black market. Last week, police arrested several people for trading the Zig for inflated returns. However, arrests only cause panic. Hence, even dealers suggest policies should “handle the root cause” by using a “soft approach.”
Regardless, Mushayavhanu blames it on the World Bank. “Maybe they didn’t advise us properly.” Though timidness could be heard from his tone, the governor reiterates that “2.5 tonnes of gold and $300 million in cash reserves is here to back the currency, placing it in good stead,” and that “people need to trust the banking system again to save the economy.”
With the Zig only in circulation for a couple of days, Zimbabweans hope they have stepped into a new era of long-term gold-backed security. But currently, it looks like the country will still be “zigzagging” through future economic challenges.
Written by Julia Jiang
