Zimbabwe Gold Currency (ZiG): An Evaluation
Zimbabwe Gold (ZiG), a novel currency derived from a gold-backed token, has demonstrated strength in the foreign exchange market while encountering challenges domestically. The Zimbabwe Reserve Bank (ZRB) recently implemented new measures to address issues surrounding the currency. On June 4, ZRB's announcement aimed to tackle the black market for the currency and enhance its utility.
The ZRB directly engaged the public through its X account to encourage individuals to report illegal currency traders or businesses rejecting the new currency. This initiative forms part of an ongoing campaign to combat illicit foreign exchange activities conducted at unofficial exchange rates. Notably, according to Bloomberg, the ZiG has appreciated by 1.9% against the US dollar since its physical release.
Mixed Outcomes of ZiG Introduction
In a report on May 15, Crime Watch Zimbabwe based in South Africa disclosed that Zimbabwean authorities had apprehended 224 unauthorized foreign exchange traders. The RBZ Financial Intelligence Unit (FIU) responded by freezing 90 bank accounts, imposing fines on 40 individuals, and intensifying monitoring of banking services to detect illegal ZiG transactions.
Source: Copperbelt Katanga Mining/LinkedIn
The crackdown led to a notable reduction in illegal money changers operating in the Central Business District (CBD) and its environs in Harare, as stated by the organization. However, ongoing challenges persist, as indicated in the RBZ X post on June 4.
Coin Shortage and Distribution Initiatives
The shortage of coins has emerged as a pressing issue for the central bank. In response, the RBZ expressed intentions to enhance the availability of small change in denominations of ZiG1, ZiG2, ZiG5, and ZiG10. This announcement, made shortly after the anti-trader message, underscores the importance of addressing the scarcity of coins.
Additionally, the RBZ outlined plans for ZiG cash withdrawals through Homelink financial services, a state-owned entity, utilizing debit cards in seven cities commencing on June 10. Other financial institutions are set to offer this service in the near future.
Reception and Criticism of ZiG
ZiG marks Zimbabwe's sixth currency in the past 15 years, supported by gold and foreign currency reserves. Originally conceived as a digital currency linked to gold prices, it transitioned into physical form in April. The public reception of ZiG has been varied.
Source: The Zimbabwean Patriot
Previously recognized as the gold-backed token, the currency is now referred to as the Gold-Backed Digital Token (GBDT). The GBDT, distinguished from the physical ZiG, is considered an investment tool rather than legal tender, amidst concerns regarding its resemblance to central bank digital currencies. Notwithstanding, multiple foreign currencies remain permissible for transactions within Zimbabwe.
