Zimbabwe's Gold-Backed ZiG Currency Faces Challenges as Schools Prepare to Open

Zimbabwe's newly introduced gold-backed currency, the ZiG, is facing its first major test as schools prepare to open for the 2024 second term. Parents and guardians are struggling to pay school fees in ZiG as most schools have not yet provided the necessary banking details to facilitate transactions in the local currency. This has forced many parents to resort to hunting for US dollars on the parallel market, where the exchange rate currently stands at 1:21 against the ZiG.

Why this matters: The success of Zimbabwe's gold-backed currency has significant implications for the country's economy and investor confidence, and its implementation challenges could have far-reaching consequences for the region. If the ZiG fails to stabilize the economy, it could lead to increased economic instability and affect neighboring countries.

The ZiG currency, which replaced the Zimdollar early last month, was introduced by the government to combat high inflation and restore investor confidence in the country's economy. The currency is backed by Zimbabwe's gold reserves, with official statistics indicating that the ZiG is supported by the Reserve Bank of Zimbabwe's (RBZ) reserve asset holdings, consisting of US$100 million in cash and 2.5 tonnes of gold worth US$185 million.

However, the Zimbabwe Coalition on Debt and Development (Zimcodd) has emphasized the need forregular auditingof the physical gold and USD cash reserves backing the ZiG by reputable and independent audit institutions. Zimcodd warns that without trusted audits, the ZiG currency risks suffering the same fate that befell The organization also highlights the importance of preventing gold leakages from the RBZ vaults, which can be caused by theft and fraud by corrupt public officials.

Zimcodd states, "More so, there is a need to set up public trust and investor confidence-building measures. These include, among others, massively reducing leakages of public resources by curbing public corruption, maintaining policy consistency, adopting a participatory approach to economic governance (multi-stakeholder consultations), and garnering adequate political will to swiftly implement a robust reform agenda (economic, governance, institutional, structural, land tenure systems reforms)."

The organization also emphasizes the importance of advanced technologies in gold production tracking and monitoring to minimize the chances of gold leakages and illicit trading. "Traceability measures help curb criminality by collecting and analysing information such as the exact source of gold, holder of gold buying license, and amount of taxes paid on gold exports," Zimcodd explains.

As schools prepare to open next week, parents are already paying fees, but many are struggling to do so in ZiG. Fidelicy Makonde, a guardian, laments, "I want to pay in ZiG, but I can't pay because I do not have the means." Another parent, Yemurai Magarezano, shares a similar sentiment: "Even if I wanted to pay using ZiG, I do not know the amount I have to pay to the school, so I have no option but to pay in United States dollars."

The Primary and Secondary Education ministry spokesperson, Taungana Ndoro, emphasizes that "it is the right of every parent to be provided with the banking details of the local currency account of the school." However, the Zimbabwe National Union of School Heads secretary-general, Munyaradzi Majoni, notes that while schools are accepting ZiG, they have not yet assessed the full situation as schools are yet to open.

The clampdown on illegal foreign currency dealers has further complicated matters for parents seeking to pay school fees in US dollars. With the US dollar trading at a premium on the parallel market, many parents are forced to hunt for the currency at unfavorable rates, adding to their financial burdens.

As Zimbabwe faces the challenges of adopting the new ZiG currency, the success of the gold-backed currency in stabilizing the economy and restoring investor confidence is yet to be determined. The difficulties faced by parents and schools in the early stages of the ZiG's implementation highlight the need for a coordinated effort from all parties involved to ensure a smooth transition and address the practical challenges on the ground.

Key Takeaways

• Zimbabwe's new gold-backed currency, ZiG, faces its first test as schools prepare to open.
• Parents struggle to pay school fees in ZiG due to lack of banking details from schools.
• ZiG is backed by $100m in cash and 2.5 tonnes of gold worth $185m.
• Zimcodd calls for regular audits of ZiG's gold and cash reserves to prevent leakages.
• ZiG's success is crucial for Zimbabwe's economy and investor confidence.