Author: Nyasha Chingono

HARARE (Reuters) – Five months after Zimbabwe launched its novel currency, the country is under pressure as increased grain imports deplete foreign reserves, threatening the government’s plans to make it the sole currency in circulation by 2026.

The gold-backed ZiG, which stands for Zimbabwe Gold, is the country’s sixth attempt at a stable currency in 15 years. It was launched in April at 13.6 ZiG to the U.S. dollar and has since lost almost 80% of its value on the black market.

The country’s central bank said on Thursday it had invested $64 million in the foreign exchange market this month to meet demand for the dollar.

“Over the past few weeks, the Federal Reserve has seen an increase in demand for foreign currency at banks, reflecting a temporary mismatch between the supply and demand for foreign currencies, thereby exerting undue pressure on the foreign exchange market,” central bank Governor John Mushayavanhu said in a statement.

This was despite a $50 million injection of funds by the Reserve Bank in July, he said, adding that the bank would continue to intervene as needed to ensure ZiG’s stability.

Independent economist Prosper Chitambara said the devaluation showed a lack of confidence in the novel currency, which locals were reluctant to accept.

Persistence Gwanyanya, a member of the Reserve Bank of Zimbabwe’s Monetary Policy Committee, told Reuters that while the pace of adoption of the novel currency so far had been tardy, it was too early to declare it a failure.

Gwanyanya said the government could raise the apply of ZIG by collecting more taxes in local currency. “The government, more than any other, should prefer its own currency and there is an urgent need to intervene by injecting more foreign currency into the market,” he said.

However, stock market investors are not convinced.

“ZiG is getting weaker, so there is no business sense in doing business with it. I don’t trust ZiG. We’ve been in this situation with Zimdollar before,” said Maynard Maketo, a street vendor selling sweets and top-up cards.

According to Pricecheck, a currency tracking website, the black market ZiG rate is between 20 and 26 ZiG to the dollar, and on the official exchange – 13.9 ZiG to the dollar.

Carol Munjoma, a grocery trader from central Harare, transacts only in US dollars.

“Where I buy these groceries, they don’t accept ZiG. So to protect my business, I charge in US dollars. ZiG would have to be stable to be accepted here,” the mother of two said.

In July, central bank chief Mushayavanhu told Reuters that authorities would keep promises to build confidence in the novel currency, a view echoed by Gwanyanya.

“It is too early to say that this could mean the end of ZiG,” Gwanyanya said.