NEW CURRENCY’S SHAKY START
The new currency continues to dominate discussion as the notes started circulating on Tuesday.
Though the government is upbeat (not that they have much of a choice!) about this ‘new era’ in the country’s economy, there are mixed feelings among the general populace, judging from the failed fortunes of our past currencies.
Introduced early April, the ZIG (Zimbabwe Gold) is the country’s sixth currency in two decades. So, it’s hardly surprising many wonder if it will stand the test of time or it will be yet another failed currency in the not so distant future.
According to the central bank, the new currency is backed by 2.5 tonnes of gold and $100 million in foreign currency reserves.
The state media went all out this week to promote the ZIG, which comes in both coins and notes, the highest denomination being 200.
There have been coin challenges in the past, forcing people to accept tokens, pens and sweets as change after buying from retailers.
It’s early days yet but the ZIG is off to a worrying start. The business community still prefer to transact in the US Dollar, charging their goods in the greenback and using the black market rate for the ZIG, in a bid to discourage its use.
The official exchange rate is currently US$1 to Z$13.43, which by the way means that our ZIG is stronger than the Pula and the Rand!
I wonder, though, if the banks in Botswana will accept my ZIG in exchange for Pulas on my next visit… that will be a story for another day but I suspect I already know the ending!
Meanwhile, withdrawal limits have been set at Z$3,000 and Z$30,000 per week for individuals and companies, respectively, as the government tries to paralyse the black market.
More than 60 suspected black market dealers, or money changers as they are commonly called, are in detention following a clampdown by the central’s bank Finance Intelligence Unit.
It remains to be seen if the government will win in doing away with the black market considering that banks don’t exchange the local currency for the US Dollar.
The trend has been that people withdraw their local currency and go to the streets to get the US Dollars.
Public transporters will also have a problem as passengers will most likely pay their fares in ZIG yet the currency does not buy fuel. The Central Bank has said fuel will be sold in forex until further notice as the commodity is also sourced from outside using US Dollars.
The mostly likely scenario is that they will insist on payments in US Dollars, which will set them on a collision course with the government.
I wonder if the banks in Botswana will accept my ZIG in exchange for Pula