Zimbabwean local traders are refusing to accept the old Zimdollars for transactions, fearing that it might become worthless when the new gold-backed currency debuts by the end of April.
According to Reuters, the southern African country is replacing its collapsing Zimdollars with a new gold-backed currency in a frantic bid to usher in stability and bring down inflation.
Local traders in the country who are mainly cash-driven are opting to carry out their transactions in US dollars as they remain unphased about Zimbabwe’s third attempt in changing its currency.
- “Fresh produce farmers are refusing Zimdollar. They fear that the money may be worthless by the time ZiG comes,” said Marceline Mupotaringa, a vendor in Mt Pleasant Heights, 15 km north of Harare.
- “I had a box full of Zimdollar …which is now worthless,” she added.
- The central bank in a note on Wednesday frowned at the development of traders rejecting Zimdollars in the country.
- “Business entities where the notes have been widely used, including commuter omnibuses, shops, fresh vegetable markets, and vendors, are advised to continue accepting payment in ZW$ notes until April 30, 2024,” the central bank said in a statement.
Brian Muchemwa, a fresh produce trader in Harare explained the rationale behind traders ditching the Zimdollar for transactions. He explained that the Zimdollar has lost considerable value since the announcement of a new gold-backed currency.
- “We were accepting Zimdollar until last Friday. It is now selling at 40,000 to $1 which does not make business sense; hence we started accepting U.S. dollars only,” Muchemwa said.
Before the announcement of the new gold-backed currency also known as ZIG, the Zimdollar was trading at 28,720 to 1 US dollar.
The whole development led to an increase in demand for US Dollars on the black market by Zimbabweans in favour of some currency traders.
- “Consumers are bringing their Zimdollar here in exchange for the U.S. dollar, but we have spiked rates to take advantage of the demand,” a black-market forex trader told Reuters.
While some large supermarkets are already displaying their prices in ZIG, Big retailers like Zimbabwe’s OK and South Africa’s Pick and Pay are still accepting ZimDollars.
Max Karombo the CEO of Zimbabwe’s Retail powerhouse, OK, explained that no big retailer has ditched the Zimdollar and that the informal sector is the only one doing that.
Recommended reading: Zimbabwe changes its currency to ZiG, as Zimbabwean dollar ceases to exist
What to Know
- The Zimbabwean Government announced the launch of a new gold-backed currency known as the ZIG, which will enter circulation by the end of April. The new currency is to trade at an exchange rate of 13.59 to 1 US dollar.
- The old and failing Zimdollars introduced in 2019 is currently trading at 40,000 Zimdollars to 1 USD. its value dropped further after the announcement of the new gold-backed ZIG with traders fearing it could become worthless after ZIG enters circulation.
- The New gold-backed ZIG is Zimbabwe’s third attempt to change its currency to fight hyperinflation and usher in much-needed stability in a decade.