Zimbabwe's New Gold-Backed Currency Gets Off to a Chaotic Start

Reserve Bank of Zimbabwe building in Harare

Zimbabwe's new gold-backed currency is designed to fight inflation and wean the economy off the US dollar, but it has suffered a chaotic start with shops accepting only US dollars on Tuesday and Zimbabweans queuing up outside banks for hours to access their savings.

The ZiG - short for Zimbabwe Gold - officially started trading on Monday, just days after the country's central bank announced it would replace the Zimbabwean dollar, which has tumbled in value over the past year.

In March, inflation reached a seven-month high of 55 percent.

It's Zimbabwe's sixth attempt at creating a new currency since 2008, and many in the country were not prepared for the switch.

Most banks had their systems offline on Tuesday, as they worked to transition them to ZiG.

This caused long queues outside some branches in the capital Harare, with hundreds of people waiting for hours to withdraw cash or access their funds.

🟣This is important feedback for the Governor to take into account and to take seriously if he has any hope of having a successful tenure. You can't be duplicitous and expect trust in return. You can't charge us USD for fuel and passports then expect us to use Zig. Policies... pic.twitter.com/OMPFevV4FJ-- Fadzayi Mahere🇿🇼 (@advocatemahere) April 11, 2024

Worthless overnight

The currency swap saw old banknotes - already of little value - become worthless overnight.

In the Harare suburb of Kambuzuma, children played in the streets with wads of cash.

Other notes laid abandoned on the pavements of the central business district, no one stopping to pick them up.

Getting hold of new ones was impossible.

On Saturday, the central bank said they were still being printed and would become available only on 30 April.

Push for local currency

Zimbabwe has applied for membership to the BRICS's New Development Bank, which aims to expand the use of local currency loans.

The central bank hopes the ZiG, which is backed by a basket of reserves comprising foreign currency and precious metals - mainly gold - would help stabilise the struggling economy.

But some financial experts have expressed doubts that ZiG is the solution.

"Zimbabwe has an insufficient $285 million of hard currency and gold reserves," wrote Hasnain Malik of research firm Tellimer, as reported by Reuters news agency.

"Zimbabwe's economy needs fundamental fixes like reductions in fiscal deficit and external debt, not a new currency."

The Zimbabwean dollar has lost almost 100 percent of its value against its US counterpart over the past year, resulting in sky-high inflation.

Soaring prices have piled pressure on Zimbabwe's 16 million people who already face widespread poverty, high unemployment and a severe drought induced by the El Nino weather pattern.

(with newswires)

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