Eswatini Financial Times

Uphill battle for ZiG to gain acceptance among Zimbabwean­s

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Zimbabwe’s new currency, the ZiG strengthen­ed a day after its debut on April 6 and gained 0.2 per cent to 13.53 per US$1.

The rand was trading at E18.47 to the dollar on Tuesday, April 7.

Reserve Bank Governor John Mushayavan­hu admitted that it will be an uphill battle for the ZiG to gain acceptance among the public who have repatedly seen the value of their locally priced assets wither.

According to reports from Zimbabwe media, the authoritie­s did not help confidence in the Zimbabwe dollar by demanding that payment for services including road toll fees and passports be made using greenbacks. Banks, retailers, telecommun­ications companies and other firms reportedly spent last weekend reconfigur­ing their systems to adopt ZiG ahead of business that resumed on April 6, and is likely to take several days before all glitches are ironed out.

Only US dollar transactio­ns were unaffected by the currency change.

A small number of the country’s 19 banks were processing the ZiG electronic transactio­ns by early Monday, with larger lenders who were expected to stream in later on.

The President of the Bankers Associatio­n of Zimbabwe said in practice they need demand and supply from customers to really get going.

Meanwhile, the Zimbabwe Stock Exchange which listed 56 companies said all share prices, price sheets and market reports would be denominate­d in the new currency.

Currency

It reported that all ZSE indices would be rebased to 100 basis points (bp), which is necessary to allow the indices to accurately reflect the performanc­e of the market in the context of the new currency.

In Harare, stocks on the main exchange were reported to have risen more than three fold since the start of the year, therefore a stock surge in the Southern African region is usually cause for concern, as it points to an inflation spiral and investors seeking a hedge to protect the value for their money.

The ZSE reported that annual consumer prices rose to 55.3 per cent in March, a sevenmonth high.

However, on the day the ZiG was introduced, stock trades said trading was very limited.

This according to investment officers resulted in most players waiting to see how things goes and expect activity to remain muted for a while. Also traders are also keeping an eye on how banks will settle previous trades, which will be impacted by the currency switch.

On another note, Senior Economist at the American Institute for Economic Research Peter Earle said he was sceptical that the ZiG will be any more of a success than its predecesso­rs.

“There has been a fundamenta­l willingnes­s of the government to abandon inflationa­ry finance. Even with the ZiG’s alleged commodity backing, flat money can be printed and undermine the stoutest sound money plans,” Earle said.

Some researcher­s are of the view that the new currency will pose a test for listed firms when they compile their financial statements.

According to MoneyWeb, even before the official scrapping of the Zimbabwe dollar as legal tender, tell-tale signs pointed to authoritie­s quietly giving up on defending it, an unusual departure from the previous stance of fiercely backing the local unit.

The currency breached several key milestones in one of its worst starts of the year since being brought back into circulatio­n, plunging 40 per cent on the street market in January. It then went on to lose value every single trading day of the year.

As a result, day-to-day transactio­ns increasing­ly became hard to comprehend with zeros returning to the local currency evoking bitter memories for citizens of the days of hyperinfla­tion.

When it resumed circulatio­n in 2019, the Zimbabwe dollar began trading at an official exchange rate of 2.5 per greenback. When it finally met its demise on Friday, it was officially trading at 30,671 per US$1, having lost 80 per cent of its value since the start of this year. The switch to ZiG by service providers over the weekend also had an unintended consequenc­e: cutting off the parallel market.

The central bank stated that most parallel market traders rely on using electronic payments to transact, and even those that trade in Zimbabwe dollar banknotes run the risk of holding worthless bills as they will be replaced by the ZiG banknotes and coins.

It further stated that the new currency notes will be released on April 30.

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 ?? ?? ▲ In Harare, stocks on the main exchange were reported to have risen more than three fold since the start of the year, therefore a stock surge in the Southern African region is usually cause for concern, as it points to an inflation spiral and investors seeking a hedge to protect the value for their money.
▲ In Harare, stocks on the main exchange were reported to have risen more than three fold since the start of the year, therefore a stock surge in the Southern African region is usually cause for concern, as it points to an inflation spiral and investors seeking a hedge to protect the value for their money.

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