ZIMBABWE GOVERNMENT FIGHTS ILLEGAL MONEY TRADERS TO STABILIZE NEW CURRENCY ZIG

Mon 20 May 2024:

Illegal currency traders have vanished from the streets of Zimbabwe’s capital, Harare, as authorities intensify efforts to stabilize the new Zimbabwe Gold (ZiG) currency, Xinhua reported.

On April 5, the Reserve Bank of Zimbabwe (RBZ) introduced the gold-backed ZiG, replacing the inflation-ravaged Zimbabwean dollar. The ZiG is part of a legal tender basket in Zimbabwe that includes the U.S. dollar, now used in over 80 percent of domestic transactions, according to the Zimbabwe National Statistics Agency.

The ZiG is backed by precious minerals, mainly gold, and foreign currency reserves, per the central bank.

Despite its stability in the formal market, the ZiG has been trading above the official rate in the parallel market, driven by illegal money traders, according to authorities.

The state-run newspaper Herald reported on Wednesday that over 200 currency traders have been arrested for illegal trading.

As of May 16, the ZiG was trading at 13.40 to one U.S. dollar on the official market, but at 14-18 to the U.S. dollar on the black market.

While authorities have succeeded in removing currency traders from the streets, there are concerns that illegal trading has merely moved underground. Additionally, some businesses are avoiding the local currency, increasing the demand for foreign currencies.

“In some shops, there are some items that cannot be purchased with ZiG. So we are forced to find substitutions that can be purchased with ZiG,” said Brian Phiri, a Harare resident.

Last week, the government announced that individuals and companies will be penalized if they reject the local currency, or if they don’t use the official exchange rate.

“Since its introduction, the local unit has actually depreciated significantly versus the U.S. dollar,” economist Zvikomborero Sibanda told Xinhua on Wednesday. “That’s why you have seen some drastic measures… taken by the financial intelligence unit of the central bank, which is freezing some bank accounts of those companies which are continuing to exclusively trade in U.S. dollars.”

In addition, Sibanda said, the drought now facing the country, which has affected domestic food production, means that demand for the U.S. dollar to import food will be strong, further piling pressure on the local currency.

Zimbabwe adopted a multi-currency regime in 2009 to bring stability to the economy, following years of hyperinflation.

SOURCE: INDEPENDENT PRESS AND NEWS AGENCIES

______________________________________________________________

FOLLOW INDEPENDENT PRESS:

WhatsApp CHANNEL
https://whatsapp.com/channel/0029VaAtNxX8fewmiFmN7N22