Zimbabwe had recently launched a new currency named ZIG which was backed by gold. The gold-backed ZIG local currency was launched in April this year to reduce the circulation of the US dollar in Zimbabwe. The government took a risk and floated the currency across all sectors for transactions in the country.
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ZIG gained significant support a month after its launch, with over 40% of all payments settled in the new currency. While Zimbabweans settled 40% of all costs in ZIG, the government paid 80% of all transactions in the gold-backed currency. The government and its people worked hand-in-hand to make the new local currency successful, threatening the US dollar.
Nonetheless, things have not gone as planned. ZIG lost nearly half its value in Q4 of 2024. The local currency struggles to keep up with the US dollar in central cities and remote towns. ZIG, touted as a solution to tame the financial crisis, has created its situation.
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ZIG Local Currency Falls 40%, Fails to Compete Against the US Dollar
In September, the value of the ZIG gold-backed currency dipped 40%. The government was forced to devalue the currency after hyping it as a “stabilizer” of the economy. Just before the launch of ZIG, the government also published a de-dollarization roadmap to control the long-running economic crisis. The idea is not finding success, as the local currency is unable to stand up against the US dollar.
“I’d say that the impact has been felt, but there should be stabilization going forward. In fact, we should see prices starting to fall,” said the Reserve Bank of Zimbabwe’s Governor John Mushayavanhu. The US dollar is again in demand as the ZIG local currency cannot sustain itself in the markets.
The demand has led black marketers to take advantage of the situation and import hard cash into the country. The hard cash, in US dollars, is being flown into the country through private jets as overseas fintech firms fill the demand.
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The exact source from where the currency bills are coming into the country has not been identified. Zimbabwe, which tried to challenge the US dollar by launching a new currency, has fallen victim to its own doing.
