Harare, Zimbabwe – At a shopping center in Glenview, a working-class downtown area in Zimbabwe's capital Harare, carpenter Arnold Mtiri stops to buy a two-liter (half-gallon) Mazoe raspberry drink.
The price tag said $3.70. Due to Zimbabwe's unstable currency and years of economic crisis, most products are priced in the more stable US dollar, and customers can receive change in the local currency.
Mthiri handed the shopkeeper four $1 bills and waited for change. But the store didn't have it in stock. The 37-year-old then tried to pay the full amount in Zimbabwe's foreign currency, ZWL (locally known as bonds), but the cashier operator refused and told him to buy something else or confiscate the balance. That's what I was told.
Mtiri said this is a scenario many Zimbabweans face on a daily basis since the country introduced a new currency, Zimbabwe Gold (ZiG), two weeks ago, just to get through the day. lamented how people had to increase their budgets for basic necessities.
On April 5, the Central Bank of Zimbabwe announced a new gold-backed currency and immediately implemented changes to its digital platform that will allow local banks to convert ZWL amounts into ZiG amounts on their systems.
However, the new banknotes will only be available at the end of the month after the central bank governor provides a grace period to allow the transition. Meanwhile, the central bank guaranteed that the bonds would continue to be used.
Despite this, many businesses like the Glenview store have already stopped trading on ZWL, leaving millions of people dependent on cash for everyday necessities, including those working in the informal economy. It has a great influence on people.
“This has happened at a time when we are already suffering from unemployment and drought. Shops are unable to give change, which means they are cutting off all transactions,” Mtiri said.
“They are making a lot of money at a time when the currency transition is not well coordinated. They have to double or triple their normal spending,” he told Al Jazeera.
Old banknotes will not be accepted
The ZiG is expected to replace both the existing ZWL bonds and the Zimbabwe dollar, which were issued in 2016 and 2019 respectively.
Zimbabwe has been suffering from currency problems for more than a decade. The ZiG is the sixth time the country has launched a new policy since 2008, when inflation reached 79.6 billion percent per month and soared to an unprecedented level of 8.97 billion percent by November of the same year, according to the International Monetary Fund. This is an attempt.
The decision to move to ZiG was an attempt to combat inflation while promoting “simplicity, certainty”. [and] At the presentation, Reserve Bank of Zimbabwe Governor John Mushayavanhu spoke about the predictability of Zimbabwe's financial situation.
But simplicity is not what many Zimbabwean consumers are currently experiencing.
Several people in Harare and neighboring towns and rural areas told Al Jazeera that despite assurances that the old banknotes would still be in use this month, all government agencies and the private and informal sector People are said to be in dire straits as they refuse to accept banknotes.
“This is more than just a shop. Last week at the toll plaza, government agency Zinara was refusing to issue bonds, and people don't have cash for zigs,” Mthiri said, adding that the government He explained how the agency required payment in US dollars at toll plazas, leading to long lines as motorists protested. But it was not successful.
“Until at least April 30th, public bonds remain legal tender for transactions.The government itself is expected to reflect confidence and lead by example, but the government has flatly refused to do so. “There is,” he added.
Immediately after the switchover, it was not possible to use online platforms to pay for telecommunications or electricity services, and some banking services were temporarily suspended from April 5 to 8, local media reported. This also affected US dollar trading.
Clara Choti, from the outskirts of Kwadzana, said transport operators were taking advantage of the situation, making transport costs higher.
“Local destinations in the suburbs where you used to pay $30 to $50. [US] The price of a cent is currently $1, unless you are traveling with two or three people. This is rare. The operator says he doesn’t have any change,” she said.
Financial expert Craig Nyord said: “All currency change efforts by governments seek to stabilize a free-falling economy. [But] If governments themselves do not commit to using local currencies, the currency will fail.
“Now ZiG is here, but you cannot buy fuel and pay import duties with it. The new currency is already doomed to failure.”
“It hurts”
Mushayabanhu said that upon the rollout of ZiG, the central bank will organize a campaign to educate people about the new currency and its safety features.
But many people, especially those far from urban centers, are concerned.
In Mulewa, a rural community 90 kilometers (55 miles) east of the capital, Agnes Kwaramba is concerned about the lack of consultation before the launch. The 61-year-old doesn't have much confidence in ZiG in general.
Kwaramba, who retired five years ago, lost his savings four times during his teaching career. She said her losses were related to currency fluctuations rather than other economic factors plaguing Zimbabwe.
“In 2001, 2008, 2016 and 2019, I lost the savings I had spent decades working and saving for retirement,” she told Al Jazeera. “Monetary policy has failed us for years. Even now, the public was not properly messaged and educated about the new currency.”
When the central bank introduced ZWL as a legal tender in 2016, it set the bank rate at 1:1 with the US dollar, assuring the public that its value was equivalent. So people, including Kwaramba, left money in their bank accounts only after realizing that the local currency was depreciating. Just a few months after the launch of ZWL, millions of people lost the value of their savings. Kwaramba's finances have not recovered.
In 2019, when the Zimbabwe dollar was issued again amidst runaway inflation, Zimbabwe faced another tough period with foreign currencies, including the US dollar, being banned until 2020.
This time on ZiG, Kwaramba said elderly people in rural areas were left with government bonds, while merchants refused to hand over small US dollars.
“Shops don't accept local currency and I don't have change when buying groceries,” Kwaramba lamented.
“Imagine the situation here in the countryside in the midst of an El Niño drought. I haven't been able to purchase a copy.”
He said the government should have deployed Reserve Bank officials across the country to help allocate the ZiG digital currency, which can be used for mobile transactions while people are waiting for their cash.
Are you not confident or don't have the timing?
The Reserve Bank assured the public that ZiG is backed by gold and is strong compared to ZWL. But people like Mtiri and Kwaramba vividly remember the hopes and ultimate disappointment of previous currency swaps.
“We cannot afford to be fooled again,” Kwaramba said. “I have lived all my life as a civil servant, but today I cannot say anything. After prices, this will affect my already meager pension.”
Economists said the 2016 bond issuance was not based on economic fundamentals and that a lack of political will to force the use of the currency resulted in bond failures and a weaker currency.
Economist Tashinga Henry Kaziba said the rationale for introducing ZiG this year was primarily to introduce an exchange medium stable enough to curb inflation and facilitate domestic and international trade.
But, he added, the context is unfortunately wrong.
“The idea itself is normal. If you have a gold standard, a currency that is backed by actual physical precious minerals, it provides price stability because it is actually backed by precious minerals, It means increasing investor confidence.”
Cagiva said that while the initiative had some advantages, ZiG was not launched in the right context as there are fundamental issues that need to be addressed within the financial sector for it to be successful. Stated.
“The first thing the Zimbabwean government, through the Reserve Bank and Treasury, has to address is the consumer confidence stake. Zimbabweans do not have confidence in the national currency,” Kaziba added.
“We know that Zimbabwe’s economic history has been marred by hyperinflation and that there has been policy inconsistency when it comes to the financial sector. All of this has eroded public confidence, so the government has We need to act accordingly and instill confidence in this new-found currency.”
Currency problems were evident even before ZiG was launched, with Zimbabweans clinging to the US dollar, which they withdraw from banks and exchange offices, obtain through remittances from abroad, and purchase on the informal market. They are downgrading their own currency. Local currency is just money for “pocket change”.
Mr. Kaziba noted that public confidence in the new currency is further limited because fuel, excise taxes and major goods are paid in U.S. dollars.
“If some of them are being purchased using US dollars, what that creates is a need for US dollars for the average citizen, the general public, or any stakeholder. And what happens after that? That said, if people do not have access to adequate amounts of US dollars within the banking sector or formal channels, they turn to the informal market to have their money exchanged,” Caziba said.
Nevertheless, the US dollar remains in Zimbabwe. Speaking at the ZiG launch, Governor Mushayabanhu said that even if a new currency is introduced, the government will not stop using the dollar as a medium of exchange.
