Zimbabwean people eagerly await monetary reform

Zimbabwean people eagerly await monetary reform

“Ticket prices have increased. Now we have to pay one US dollar for each short trip and not 50 cents like before! And transport companies refuse to accept the old currency.” Many people in Zimbabwe feel the same as the young woman in the capital, Harare.

Since the government unexpectedly announced monetary reform two weeks ago, there has been great uncertainty. Banks, shops, mobile phone providers, electricity and water providers were as surprised as the citizens.

John Mushayavanhu, Governor of the Central Bank of Zimbabwe, presents the new national currency Zimbabwe Gold, abbreviated ZiG, at a press conference.

At the end of April the Zimbabwe dollar will run out

Prices are rising and the Zimbabwe dollar is rapidly losing value. Because the old currency will go out of circulation at the end of April. Anyone who has not managed to change or spend their money until then can cancel their savings.

Compounding the chaos: the new currency “Zimbabwe Gold”, abbreviated ZiG, will not be available until April 30. “The current chaos could have been avoided if the government had explained to people beforehand how the new currency works and how to use it,” believes student Danet Ngulube.

The black market is developing splendidly

Banking was virtually impossible for days. Credit cards and online banking suddenly stopped working, according to reports from Harare. The black market flourishes in the streets. Wads of old Zimbabwean banknotes are being exchanged for US dollars or South African rands, at exchange rates significantly worse than those the government has officially set.

Banks only exchange cash if there is proof of origin. But almost no one can present this, because most people have been conducting their businesses for years without going through the State.

“Pillow or mattress as a bench”

Economist Gift Mugano is convinced that many citizens do not trust politics because they have not only lost a lot of money in the five previous monetary reforms since 2008, but also their pensions, healthcare and life insurance.

“There is a large informal financial sector, which is something like an economy in itself, its own country. 70, 80 percent is crossed by it, and this sector does not care at all about financial policy,” explains Mugano. . “People use their pillows or their mattresses as a bank, that’s where they keep their money. For them, only cash, only cash. They don’t care if the central bank has reserves in gold or US dollars.”

Gold and diamonds said to back new currency

But it is precisely these reserves on which Zimbabwe places all its hopes. Two and a half tons of gold and other valuable raw materials, such as diamonds, are intended to guarantee the value of the new currency, reinforce confidence in the ZiG, curb rampant inflation, stimulate the economy and reduce the share of the US dollar.

Financial expert Happiness Zengeni believes the government’s plan can work. “It could work, at least in the short term, if they stay disciplined and don’t print new money. And they have to make sure the new currency can be exchanged for US dollars.”

Major concerns about Independence Day

The country’s central bank promises to do everything possible to ensure that the ZiG remains stable. However, people have their doubts about it.

“The central bank should not have set an expiration date for the old currency, because it is no longer accepted in the market,” complains a market visitor. “That’s unfair. You can’t throw away the old you have before the new comes in. But that’s exactly what our central bank did.”

That’s why there are major concerns in crisis-stricken Zimbabwe. In fact, the country has reason to celebrate. This week marks the 44th anniversary of Independence Day.

Stephan Ueberbach, ARD Johannesburg, AIO Information, April 17, 2024 13:34

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