Zimbabwe's New Currency Under Siege: ZiG Fights for Survival

Zimbabwe's new gold-backed currency, the ZiG, faces significant challenges after losing almost 80% of its value on the black market within five months. Increased grain imports are depleting foreign reserves, and local confidence remains low despite government interventions. Experts argue it's too early to write off the currency.

Five months after its launch, Zimbabwe's gold-backed currency, the ZiG, is struggling to gain a foothold as increased grain imports strain foreign reserves. This puts at risk the government's ambitious plan to make it the sole currency by 2026, with the ZiG already losing nearly 80% of its value on the black market.

The Reserve Bank of Zimbabwe injected $64 million into the forex market this month to meet dollar demand, said central bank governor John Mushayavanhu. Despite previous interventions, the currency experiences undue pressure due to supply and demand mismatches, he added.

Economist Prosper Chitambara and Monetary Policy Committee member Persistence Gwanyanya both highlight low local confidence as a major issue. They argue it's premature to deem the currency a failure, suggesting the government could spur ZiG use by levying more taxes in the local currency. However, traders remain skeptical, preferring to transact in U.S. dollars.

(With inputs from agencies.)