Harare – The Zimbabwean economy is once again in a state of turmoil, with the Zimbabwe Gold currency (ZiG or ZWG) experiencing a dramatic decline, pushing the country towards a potential economic crisis.
The ZWG, introduced in April this year to replace the Zimdollar, has lost a staggering 40% of its value in four months, sparking a wave of panic within Zanu PF circles and calls for drastic measures.
The ZWG, initially trading at ZWG13.50 to the US dollar, is now trading at between ZWG25-ZWG28 on the black market. Prices of basic commodities have skyrocketed, with some service providers demanding payment exclusively in foreign currency to avoid losses.
The situation has become so dire that even Zanu PF spokesperson Christopher Mutsvangwa has publicly expressed his anxieties, urging President Mnangagwa to take urgent action. Mutsvangwa, speaking at a press conference, called for a Statutory Instrument (SI) to be issued, making the ZWG the sole legal tender.
“We are having a situation where on one side, I have my US dollars and on the other side, the currency is not the same. All these two currencies are mine. Then I cause inflation between the two currencies. I mean, what economics is that? What finance is that?,” Mutsvangwa said while highlighting the disparity between the two currencies.
He went on to accuse individuals of manipulating the system, stating, “There are people who are trying to manipulate the system, because the US dollars in the system are not a gift of the American government. No American government writes US dollars for Zimbabwe.”
Mutsvangwa, speaking not just as a Zanu PF spokesperson but as a concerned Zimbabwean, pleaded for decisive action.
The ZWG’s decline is not an isolated incident. Zimbabwe has a history of currency instability, with the previous Zimbabwean dollar being scrapped in 2009 after being ravaged by hyperinflation. The country then adopted a multicurrency regime dominated by the US dollar.
The current crisis has highlighted the challenges of introducing a new currency in a fragile economy. The scarcity of US dollars in the interbank market has forced the Reserve Bank of Zimbabwe to inject $190 million into the market to support the ZWG.
The ZiG’s decline has also had a significant impact on the use of foreign currency. Dollars are now used in 60% of transactions, compared to 85% when the ZWG was first introduced.
The ZiG is the southern African nation’s sixth attempt at having a functioning local currency in 15 years. Its predecessor, the Zimbabwean dollar, experienced a dramatic decline in value, losing 80% of its value against the US dollar in 2023 alone.
The ZWG’s decline has raised concerns about the government’s ability to stabilize the economy. The government’s response to the crisis remains unclear, with President Mnangagwa yet to make a public statement on the matter.
However, the growing pressure from within his own party and the mounting public discontent suggest that the government is facing a critical moment in its efforts to stabilize the economy.
