Zimbabwe plans to enforce using its gold-backed currency, ZiG, for pricing goods, aiming to curb unofficial markets. The move follows past currency failures due to inflation and dollar devaluation.
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By Ray Ndlovu
Zimbabwe plans new rules to compel businesses to only use the official exchange rate of its gold-backed currency, the ZiG, when pricing goods and services.
The move, announced Tuesday by Finance Minister Mthuli Ncube, is aimed at preventing the development of an unofficial market in the ZiG, which flourished during previous versions of the local Zimbabwean currency and contributed to their failure.
The ZiG, which stands for Zimbabwe Gold, was introduced last month and is the southern African nation’s sixth attempt to establish a stable local unit since 2008. Earlier efforts were scuppered by skyrocketing inflation and collapsing values against the dollar on the unofficial market.
Ncube said in a statement that the central bank’s reserves were more than sufficient to meet demands for liquidity and there was no basis “to use any other exchange rate in the pricing of their goods and services than the interbank exchange rate set by the Reserve Bank of Zimbabwe.”
The ZiG is backed by 2.5 tons of gold and about $100 million in foreign currency reserves held by the central bank.
The ZiG that started trading April 8 at a level of 13.56 to the dollar stood at 13.66 per dollar on Tuesday, according to data posted on the central bank’s website.
Public lack of confidence in Zimbabwe’s previous local currencies has led to 80% of all commerce being conducted in US dollars.
Read also:
- Zimbabwe aims to tame hyperinflation with ZiG currency
- Cathy Buckle: What’s in a name? Zimbabwe’s ZiG currency chaos
- Zimbabwe’s new ZiG currency spells disaster for stock market investors
© 2024 Bloomberg L.P.
