Zimbabwe Dollar Remains Legal Tender Alongside New ZiG Currency

Zimbabwe introduces new gold-backed currency 'ZiG' to stabilize economy, but challenges remain with public trust, illegal forex dealings, and US dollar dominance.

Olalekan Adigun
New Update
Zimbabwe Dollar Remains Legal Tender Alongside New ZiG Currency

Zimbabwe Dollar Remains Legal Tender Alongside New ZiG Currency

The Reserve Bank of Zimbabwe (RBZ) governor, Dr. John Mushayavanhu, announced on Tuesday that the Zimbabwe dollar (ZWL), also known as bond notes, will remain legal tender alongside the newly introduced Zimbabwe Gold (ZiG) currency. The ZiG, which is backed by gold and other precious metals, was launched on April 5, 2024 as part of efforts to stabilize the local economy.

Dr. Mushayavanhu stated that the ZWL is no longer expiring and will continue to circulate in the Zimbabwean market. The RBZ has set withdrawal limits of ZiG3,000 for individuals and ZiG30,000 for corporates, with denominations of 1 ZiG, 2 ZiG, and 5 ZiG in coins and notes ranging from 10 ZiG to ZiG200.

President Emmerson Mnangagwa called on Zimbabweans to protect and embrace the ZiG as a symbol of national identity and dignity. The RBZ affirmed its commitment to curtailing money supply growth and closing potential leakages that could threaten the stability of the new currency.

Why this matters: The introduction of the ZiG currency is a meaningful action in Zimbabwe's efforts to stabilize its economy and curb hyperinflation. The success of the ZiG will depend on public trust and the government's ability to maintain monetary discipline and prevent the printing of excess money, which has plagued previous currency reforms.

However, some economists and industry representatives have urged the authorities to crack down on unscrupulous businesses and individuals who are inflating the exchange rate and engaging in illicit speculative behavior. They warn that such activities could undermine the economic gains made by the Second Republic and hinder Zimbabwe's competitiveness in the upcoming Africa Continental Free Trade Area (AfCFTA).

The dominance of the US dollar in local transactions is also seen as a concern, as it could lead to Zimbabwe becoming a 'supermarket' for regional imports once the AfCFTA is fully operational. Economists stress the need to embrace the local currency and address macroeconomic challenges to ensure the competitiveness of Zimbabwean businesses in the new trade environment.

As of May 2, 2024, the official exchange rate stands at approximately 13.5 ZiG to 1 U.S. dollar, with a black market rate of around 20 ZiG to 1 USD. The authorities have arrested over 80 illegal money dealers for manipulating the local currency rate. While some locals expressed hope for the ZiG's widespread acceptance, others noted limited circulation on the first day and the need for more public awareness.

Key Takeaways

  • Zimbabwe introduces new gold-backed currency, ZiG, alongside existing ZWL bond notes
  • ZiG has withdrawal limits of ZiG3,000 for individuals, ZiG30,000 for corporates
  • President calls on Zimbabweans to embrace ZiG as symbol of national identity
  • ZiG success depends on public trust, monetary discipline to prevent excess printing
  • Official ZiG-USD rate 13.5:1, black market 20:1, authorities arrest illegal dealers