USD to ZiG: What is the future of Zimbabwe’s Gold currency?

April 19, 2024 01:35 AM PDT | By Invezz
 USD to ZiG: What is the future of Zimbabwe’s Gold currency?
Image source: Invezz

The Zimbabwe Gold (ZiG) is holding well against the US dollar as many people in the country move to the new currency. Data shows that the USD to ZiG exchange rate stood at 13.3 on Friday morning, a few points below its initial trading level of 13.56.

The Zimbabwean central bank believes that the ZiG currency has the potential to become a stable medium of exchange for the country. It has ruled out going to the old behavior of printing cash that has led to the collapse of the previous iterations of the Zimbabwean dollar.

At the same time, the bank has committed to ensure that the currency does not strengthen substantially, a move that will hurt exporters. Exporters tend to prefer a stable or a weak currency since it makes their products cheaper.

Still, some analysts believe that the future of the Zimbabwe Gold is likely doomed and that it will end as the other currencies have ended. For one, the current government is staffed by most of the leaders who were in Robert Mugabe’s administration and corruption is still rife in the country. 

At the same time, the ZiG is an experiment since no other country has successfully backed its currency with other assets. ZiG is backed by 25 tons of gold, which are now valued at over $1.9 billion. It is also backed by about $100 million in foreign currency.

The government hopes to continue boosting its backed assets through royalty payments by miners. In 2023, Zimbabwe gold miners produced about 30 tons of gold, a 15% decline from the same period in 2022.

The ZiG currency sends memories of what happened to the United States in the 1970s when the country abandoned the gold standard to curb inflation. It also abandoned the standard to prevent other countries from overburdening the system by redeeming dollars for gold.

The other risk for the ZiG currency is that most people in Zimbabwe have lost their faith in the government and its numerous currencies. Those who bought the previous version of the Zimbabwe dollar lost most of their value as it crashed.

At the same time, the ZiG currency faces substantial competition from the US dollar. Estimates are that over 80% of all transactions are now made in the greenback. As a result, it will be difficult for people using the USD to move to the ZiG currency.

There is a likelihood that the ZiG currency will deteriorate once the conversion period from the ZW$ to ZIG ends at the end of the month.

The post USD to ZiG: What is the future of Zimbabwe's Gold currency? appeared first on Invezz


Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations, and video (Content) is a service of Kalkine Media LLC., having Delaware File No. 4697309 (“Kalkine Media, we or us”) and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media.
The content published on Kalkine Media also includes feeds sourced from third-party providers. Kalkine does not assert any ownership rights over the content provided by these third-party sources. The inclusion of such feeds on the Website is for informational purposes only. Kalkine does not guarantee the accuracy, completeness, or reliability of the content obtained from third-party feeds. Furthermore, Kalkine Media shall not be held liable for any errors, omissions, or inaccuracies in the content obtained from third-party feeds, nor for any damages or losses arising from the use of such content. Some of the images/music that may be used on this website are copyrighted to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures/music displayed/used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it, as necessary.
This disclaimer is subject to change without notice. Users are advised to review this disclaimer periodically for any updates or modifications.


Sponsored Articles


Investing Ideas

Previous Next