While the Zimbabwean government says its new currency, the Zimbabwe Gold (ZiG), has been stable and performing well since its introduction on 8 April 2024, market trends and economists indicate it has depreciated by 40% in five months.
This signals continued currency volatility, exchange rate instability and a spiral which is deteriorating in the battered economy.
The official exchange rate is US$1:ZiG.13.8, but in the parallel market it is US$1:ZiG23.
This has created new room for arbitrage and the return of the black market; taking advantage of exchange rate differences in different markets for the same currency.
Although authorities have been arresting black market currency dealers and threatening businesses for using a higher rate than the virtually pegged official one, this has failed to stop the depreciation of ZiG.
Government officials, including Finance ministry permanent secretary George Guvamatanga, on this video, still claim ZiG is strong as it is gold-backed and there are also foreign exchange reserves supporting it despite market evidence to the contrary.
However, economists like Professor Gift Mugano say ZiG is doomed to fail due to the parlous state of the economy, macroeconomic fundamentals instability and lack of productivity in the economy.
Steve Hanke, a renowned American economist and currency expert, said:
“On this week’s Hanke’s CurrencyWatchlist, the Zimbabwean ZiG checks in as the 3RD WORST currency IN THE WORLD. The ZiG has depreciated by 40% against the USD since Jan-24 (specifically measured since 8 April 2024).”
Newshawks
