Can Zimbabwe’s New Gold-Backed Currency Overcome Public Skepticism and Crackdowns?

Zimbabwe’s latest attempt to stabilize its economy through the introduction of a gold-backed currency, the Zimbabwe Gold (ZiG), has met with public skepticism and stringent enforcement measures. Despite extensive promotional efforts, including a patriotic song by reggae artist Ras Caleb, the ZiG faces substantial hurdles.

The government launched the ZiG in April, hoping to replace the faltering Zimbabwe dollar. Officials from the Reserve Bank of Zimbabwe and the ruling ZANU-PF party have held numerous rallies to persuade the public to embrace the new currency over the U.S. dollar. However, the ZiG’s value has plummeted on the black market, where $1 can be exchanged for up to 17 ZiGs, despite maintaining its value on the official market.

To support the currency, authorities have intensified their crackdown on street currency dealers, arresting over 200 individuals and freezing business accounts accused of trading at unofficial rates. Notable arrests include twins Tapiwa and Justice Nyamadzawo, who were detained for allegedly selling cellphone airtime at a rate of 15 ZiGs per dollar, slightly above the official rate of 13 ZiGs per dollar.

Despite these measures, many Zimbabweans continue to prefer U.S. dollars for transactions, driven by deep-seated mistrust of the local currency. The crackdown has pushed currency trading underground, with dealers now using social media platforms like WhatsApp and Facebook to connect with customers.

The reliance on U.S. dollars persists, with many shops, vendors, and even government departments favoring the greenback. Economists argue that building public confidence in the local currency is crucial, warning that enforcement alone will not resolve the underlying issues.

Prosper Chitambara, an economist, emphasized that without restoring faith in the local currency, the demand for U.S. dollars will continue to fuel the black market. Until the public perceives the ZiG as a stable and reliable alternative, Zimbabwe’s economic challenges are likely to persist.