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Zimbabwe ZiG Currency Shows Stability Amid Government Interventions

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HARARE,— The Zimbabwe Gold (ZiG) currency has demonstrated relative stability in recent months, trading at 13.5 against the US dollar as of Monday.

This stability reflects various government measures aimed at defending the currency.

According to the central bank, the current USD to ZiG exchange rate stands at 13.50, which is slightly above its initial launch price. The government’s efforts to maintain this stability have included stringent actions against street traders and substantial fines for transacting outside the official exchange rate.

The government has actively cracked down on street traders, who were previously blamed for the devaluation of earlier currency versions. Additionally, daily exchange rates are now transparently listed on the central bank’s website, enhancing market confidence.

These measures have contributed to a more stable economic environment. Inflation rates have fallen, and the government has scrapped the restrictive 180-day holding rule for stock market transactions. This rule previously required buyers of Zimbabwean stocks to hold them for at least 180 days before selling, with higher capital gains tax imposed on premature sales.

Despite these positive developments, there are ongoing concerns about the long-term viability of the ZiG currency. Zimbabwe’s history of currency collapses, most recently with the Zim RTGS dollar, which lost nearly all its value, casts a shadow over current optimism.

The government has pledged not to print additional ZiG currency to fund its budget, a promise that observers view with skepticism given past practices. There is also apprehension about the sustainability of the currency peg. Zimbabwe Gold is backed by 2.5 tons of gold and over $100 million, but maintaining such a peg is historically challenging.

For instance, the Hong Kong Central Bank had to intervene 49 times in 2023, spending over HK$293 billion to defend its currency peg. It remains uncertain whether Zimbabwe possesses the financial resources necessary to similarly defend the ZiG.

While the Zimbabwe Gold currency has shown stability and had a positive impact on the economy, its future remains uncertain. The government’s commitment to maintaining this stability will be crucial in ensuring the long-term success of the ZiG currency.