Zimbabwe Central Bank Addresses Challenges with New Currency Launch

Zimbabwe’s recently launched gold-backed currency, the Zimbabwe Gold (ZiG), is experiencing mixed results. While performing well on the foreign exchange market, it’s facing challenges within the country.

On June 4th, the Zimbabwe Reserve Bank (ZRB) took steps to address a black market for ZiG. Through its X account, the ZRB urged citizens to report illegal currency traders and businesses refusing to accept ZiG. This initiative aims to combat unofficial foreign exchange trading, a persistent issue in Zimbabwe.

According to Bloomberg, ZiG has seen a 1.9% gain against the US dollar since its physical launch. However, despite initial crackdowns by authorities, the ZRB’s X post suggests the fight against the black market continues.

Coin Shortage and Accessibility Issues

Another hurdle for the ZRB is a lack of ZiG coins in smaller denominations. The ZRB announced plans to increase the availability of ZiG1, ZiG2, ZiG5, and ZiG10 coins to address this problem.

Furthermore, to enhance accessibility, ZiG cash withdrawals using debit cards will be available at government-owned Homelink financial services in seven cities starting June 10th. This service will eventually expand to other financial institutions.

ZiG marks Zimbabwe’s sixth currency in just 15 years. While backed by gold and foreign currency, it initially launched as a digital token pegged to the gold price. Its introduction in physical form in April received mixed public reactions.

The previous gold-backed digital token, now called the GBDT (gold-backed digital token), faced criticism for its similarity to central bank digital currencies. Currently, the GBDT functions as a separate “investment instrument” from the physical ZiG. Additionally, several foreign currencies remain legal tender in Zimbabwe.

The success of ZiG hinges on the ZRB’s ability to address the black market, increase coin availability, and improve accessibility. Public perception will also play a crucial role in determining the long-term viability of this new currency.