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Zimbabwe's new gold-backed currency began trading on Monday amid doubts whether reopening the country's currency for the third time in a decade will be any more successful in ending repeated and devastatingly high inflation. did.
On Friday, the central bank announced the opening rate for Zimbabwe Gold (ZiG) at 13.56 to the dollar, losing about 80% of its value this year to the Real Time Gross Settlement Dollar (RTGS), which used to trade at $1. It was replaced. Before the change, it was 28,720 to $1.
The Reserve Bank of Zimbabwe said bank balances would be transferred into the new currency over the weekend, customers would receive the money within 21 days, and the new banknotes would start circulating at the end of this month.
RTGS, also known as Zim Dollar, was launched in 2019 after 10 years of dollarization. This included so-called bond coins and bonds, nominally pegged to the US dollar and introduced in 2014 and 2016, respectively.
But the Zim dollar has struggled to gain confidence, and its sharp decline this year has pushed annual inflation above 55% in March, a return to the hyperinflationary era of 2007-2009 under former president Robert Mugabe. There were growing concerns that this might happen.
“Fundamental changes to Zimbabwe's monetary system were desperately needed,” Jack Knell of research firm Oxford Economics said in a note to clients.
Nel said Friday's central bank statement pinpointed the most pressing issues. “It is the same lack of confidence in both the national currency and the framework that governs it that calls into question the effectiveness of these new measures,” he added.
Commercial banks were using the new official exchange rate on Monday, according to a Reuters inquiry. Whether the currency, which the central bank described as “structured” and “backed by a composite basket of foreign currency and precious metals (primarily gold) held in foreign exchange reserves,” will be able to maintain this value will soon be determined. was not clear.
Nor was it expected that businesses or the public would accept it as a means of payment or a store of value. According to the central bank, about 80-85% of transactions are currently done in foreign currencies.
“Zimbabwe's foreign exchange and gold reserves are $285 million short,” Hasnain Malaik of research firm Tellimer said in a note. “To rebuild the economy, Zimbabwe needs to address the root causes of its problems.”
These issues include central bank financing of the government, unsustainable budget deficits, debt arrears and sanctions from Western countries, and Malaik believes that under the current ruling party ZANU-PF, some issues It is not clear whether the issue will be resolved, he said.