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Zimbabwe’s new currency trading stronger than the rand – for now
Zimbabwe’s new currency, the ZiG, strengthened a day after its debut, the central bank said.
The currency gained 0.2% to 13.53 per US dollar, according to data published on the Reserve Bank of Zimbabwe’s website on Tuesday.
The rand was trading at R18.47 to the dollar by 12h20 on Tuesday.
The ZiG, short for Zimbabwe Gold, was introduced on Monday, Zimbabwe’s sixth attempt to resuscitate the local currency. Its predecessor, the Zimbabwe dollar, lost value every single trading day of this year before being abandoned April 5.
Zimbabwe’s sixth try
The ZiG began trading on Monday as businesses struggled with the nation’s revamped unit.
Reserve Bank Governor John Mushayavanhu set the introductory exchange rate of 13.56 per US dollar for the ZiG, short for Zimbabwe Gold, when it started trading.
The daily exchange rate will be determined in the interbank market from now on, Mushayavanhu said during an April 5 presentation of his first monetary policy statement.
Five previous attempts to resuscitate a local currency have failed largely because the cash-strapped government resorted to printing money to fund the budget.
While Mushayavanhu repeatedly said that won’t happen under his watch, it will be an uphill battle for the ZiG to gain acceptance among a public who’ve repeatedly seen the value of their locally priced assets wither.
The authorities didn’t help confidence in the Zimbabwe dollar by demanding that payment for services including road toll fees and passports be made using greenbacks.
Peter C. Earle, senior economist at the American Institute for Economic Research, is skeptical the ZiG will be any more of a success than its predecessors.
There has been a “fundamental unwillingness of the government to abandon inflationary finance,” he said. “Even with the ZiG’s alleged commodity backing, fiat money can be printed and undermine the stoutest sound money plans.”
Banks, retailers, telecommunications companies and other firms spent the weekend reconfiguring their systems to adopt ZiG ahead of business resuming Monday, and it’s likely to take several days before all the glitches are ironed out. Only US dollar transactions were unaffected by the currency change.
A small number of the nation’s 19 banks were processing ZiG electronic transactions by early Monday, with larger lenders expected to come on stream later in the day, according to Lawrence Nyazema, president of the Bankers Association of Zimbabwe.source: BUSINESSTECH
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