economy

Can gold-backed ZiG currency rescue Zimbabwe’s economy? – BizNews

In the tumultuous landscape of Zimbabwe’s economic history, the quest for stability in currency has been fraught with challenges. From the crippling hyperinflation of 2008 to the dominance of the US dollar today, the struggle for a reliable medium of exchange persists. Now, Zimbabwe sets its sights on a new dawn with the ZiG, backed by gold reserves. But amid nostalgic hopes and practical hurdles, can this latest attempt truly restore faith in the nation’s monetary future?

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By Lionel Laurent ___STEADY_PAYWALL___

Zimbabwe has a painful relationship with money. At the height of hyperinflation in 2008, the African economy’s billion- and trillion-dollar banknotes could barely buy toilet paper as war, autocracy and monetary recklessness crushed confidence and ruined lives. Fresh economic woes mean memories of that time are starting to flood back: Inflation is at 55%, the US dollar has become dominant and buying a loaf of bread requires counting out 100 bills.

Hence why Zimbabwe has its sights on a new start with the ZiG, which is short for Zimbabwe Gold and is backed by some $185 million worth of gold and other reserves. This is the sixth attempt at trying to overhaul a currency whose latest iteration resumed circulation in 2019 at 2.5 per US dollar and ended it last Friday at 30,671 — having lost some 80% of its value since the start of this year. After dabbling in literal gold coins and centrally issued digital variants, Zimbabwe’s central bank is saying the ZiG is a chance for a “solid and stable” national currency.

Extreme caution is recommended with this kind of project, however. Start with the principle: The appeal of backing a currency’s exchange rate with gold — in this case 13.56 ZiGs to the US dollar — is rooted in the nostalgic, if not mythical, view of the gold standard of the 19th and 20th centuries as a mechanism that kept money “sound” and inflation low. But even if goldbugs note with pride that the yellow metal has fulfilled its stable-store-of-value claims over the decades, with its current record reflecting a wave of enthusiasm in a more uncertain world, in the short-term, its price can be painfully volatile.

In his book The Truth About Inflation, UBS economist Paul Donovan gives the example of a staple purchase like a gallon of milk: Between 1996 and 2004, which is a long period for the average household, its price in US dollars was more stable than its price in gold dollars (assuming a standard price of $35 per troy ounce). In September 2022, Donovan calculates milk prices in US dollars were rising 16%, but in gold terms were rising over 23%. The idea that gold would be more appealing than greenbacks as money doesn’t necessarily hold when it comes to price stability — which matters for Zimbabwe, as it wants ZiG to dent the US dollar’s appeal in its local economy. Some 80% of all transactions are conducted in USD.

Then there are more practical obstacles: Maintaining a gold-backed currency like ZiG will be far from straightforward. Yvonne Mhango of Bloomberg Economics says that Zimbabwe’s gold reserves might not be plentiful enough to maintain the desired exchange rate. The fact that the country is going it alone, without a similar move from its trade partners, means that the new currency will be exposed to the volatility of the gold price. History shows the gold standard, in its classical pre-World War I form, required cooperation and commitment between world powers to defend gold parity. That’s not going to happen here.

There is undoubtedly a dire need for change in Zimbabwe. Bloomberg’s Next Africa newsletter declared the local currency effectively “dead” in January. Maybe the ZiG will somehow do better than its predecessors. But if the country has veered from hyperinflation to hyper-dollarization in a relatively short amount of time, and is currently battling double-digit inflation and interest rates, it’s because there are deep-seated issues beyond the money supply such as economic governance or corruption risks.

Without deeper reform, one of the country’s top exports will remain its own people — and maybe the odd trillion-dollar banknote as a souvenir.

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economy

Zimbabwe economic diplomacy stance huge boost for ZITF — Minister Dr Muswere – Chronicle

Zimbabwe economic diplomacy stance huge boost for ZITF — Minister Dr Muswere

Nqobile Tshili, [email protected]

INFORMATION, Publicity and Broadcasting Services Minister, Dr Jenfan Muswere, has said the Second Republic’s economic diplomacy, anchored on engagement and re-engagement, has contributed immensely to the success of the 64th edition of the Zimbabwe International Trade Fair (ZITF).

The oversubscribed premier trade expo commenced on a high note on Tuesday and ends with the official opening ceremony to be led by Kenyan President, Dr William Ruto today.

This year’s expo is running under the theme: “Innovation: The Catalyst for Industrialisation and Trade” and has attracted a diversity of local and foreign business players, forcing the ZITF Company to turn away 70 potential participants due to shortage of space.

Countries such as the United States of America, China, United Kingdom and the European Union are part of the exhibitors while South Korea and United Arab Emirates are exhibiting at the trade showcase for the first time.

Speaking after a tour of the Zimpapers’ stand, Dr Muswere said President Mnangagwa’s policies have led to the growth of the exhibitions.

“It’s a huge success underpinned by a magnetic investment climate, which has been created under the Second Republic, under the leadership of President ED Mnangagwa,” he said.

“It’s a huge success because of industrial growth, the macro-economic growth that is being registered as we journey towards becoming an upper middle-income society by 2030,” said Dr Muswere.He said the ZITF was fulfilling its mandate as local and international companies have an opportunity to connect and create new markets.

Dr Muswere said the ZITF also affirms the success of the Second Republic’s engagement and re-engagement strategy.

“There is also an increase in space utilisation and also an increase in terms of trade numbers that have been registered. “Exhibitors have had an opportunity to market their goods and services. There have been so many inquiries from various international and local companies,” said the minister.

“So, this is also part of the re-engagement and engagement strategy whereby we are ensuring that as a country we are a friend to all and an enemy to none. So, you will realise that a number of countries are exhibiting including Western related organisations and we seek to ensure we boost trade in order to achieve favourable balance of trade in our country.”

Dr Muswere said the focus is not just on international exhibits but also on strengthening trade within local companies, adding that the country’s import and export gap is being reduced, which is another milestone that the ZITF is showcasing.

“It’s also a success given that we had a huge trade deficit before which we have closed as a country. You’ll realise that our export strategy has been key and pivotal in terms of boosting trade with other respective countries,” he said.

“The other strategy is that the local productivity strategy has done wonders as we seek to promote brand Zimbabwe. We support the development, the innovation of various goods and services as we strengthen local value chains.”

Dr Muswere also touched on the media reforms that are ongoing saying the Government will continue to consult the industry to come up with a robust strategy that does not leave anyone behind.

He reaffirmed President Mnangagwa’s message that as the country is facing drought, the Government will provide food aid to all vulnerable citizens and no one will die of hunger as the Government has the institutional capacity to provide for all citizens and where necessary imports will be made.

“His Excellency, the President has assured the nation that no one and no place will have hunger and starvation. We also need to emphasise that the Government has put in place structures of domestic mobilisation of resources, domestic mobilisation and mopping up of excess grain,” said the minister.

“What I can assure you is that no one will die of hunger in our country. We have the institutional capacity to be able to provide food domestically and also externally, utilising the private sector and our people,” said Dr Muswere. — @nqotshili

economy

Zimbabwe economic diplomacy stance huge boost for ZITF — Minister Dr Muswere – Chronicle

Zimbabwe economic diplomacy stance huge boost for ZITF — Minister Dr Muswere

Nqobile Tshili, [email protected]

The oversubscribed premier trade expo commenced on a high note on Tuesday and ends with the official opening ceremony to be led by Kenyan President, Dr William Ruto today.

Speaking after a tour of the Zimpapers’ stand, Dr Muswere said President Mnangagwa’s policies have led to the growth of the exhibitions.

“It’s a huge success underpinned by a magnetic investment climate, which has been created under the Second Republic, under the leadership of President ED Mnangagwa,” he said.

Dr Muswere said the ZITF also affirms the success of the Second Republic’s engagement and re-engagement strategy.

Dr Muswere also touched on the media reforms that are ongoing saying the Government will continue to consult the industry to come up with a robust strategy that does not leave anyone behind.

economy

Zimbabwe economic diplomacy stance huge boost for ZITF — Minister Dr Muswere – Chronicle

Zimbabwe economic diplomacy stance huge boost for ZITF — Minister Dr Muswere

Nqobile Tshili, [email protected]

The oversubscribed premier trade expo commenced on a high note on Tuesday and ends with the official opening ceremony to be led by Kenyan President, Dr William Ruto today.

Speaking after a tour of the Zimpapers’ stand, Dr Muswere said President Mnangagwa’s policies have led to the growth of the exhibitions.

“It’s a huge success underpinned by a magnetic investment climate, which has been created under the Second Republic, under the leadership of President ED Mnangagwa,” he said.

Dr Muswere said the ZITF also affirms the success of the Second Republic’s engagement and re-engagement strategy.

Dr Muswere also touched on the media reforms that are ongoing saying the Government will continue to consult the industry to come up with a robust strategy that does not leave anyone behind.