Zimbabwe has initiated a campaign to attract foreign investment, highlighting its latest gold-backed currency, the Zimbabwe Gold (ZiG), as a key element. This move aims to assure investors of its commitment to avoiding past economic missteps. The country, known for its history of currency crises, has engaged in an international road show to promote this initiative, with stops in Johannesburg, London, and Dubai.
Despite these efforts, there is skepticism regarding the ZiG's ability to maintain value without succumbing to the issues that plagued its predecessors, notably excessive money printing by the government. In response, Zimbabwe has introduced fines to mandate the use of the ZiG's official exchange rate, determined daily by the central bank, and is requiring companies to pay a portion of their taxes in ZiG to bolster its adoption.
Experts note that the introduction of the ZiG alone may not be sufficient to attract significant foreign investment. Investors are looking for evidence of growing hard currency reserves and a reliable mechanism for currency conversion and repatriation. The ZiG, launched on April 5, represents Zimbabwe's sixth attempt in 15 years to establish a stable local currency, succeeding the rapidly devalued Zimbabwean dollar. It is supported by 2.5 tons of gold and $100 million in foreign exchange reserves.
While the US dollar remains preferred for transactions, ZiG notes and coins are in circulation, with the central bank committing to limit currency issuance to available reserves and to publish annual data to verify this policy. The effectiveness of these measures remains to be seen, with analysts adopting a wait-and-see approach.
Source: bnnbloomberg.ca