Zimbabweans skeptical about country’s latest currency

By Linda Mujuru, GPJ Zimbabwe

This story was originally published by Global Press Journal.

HARARE, ZIMBABWE — Annanciata Simbe, a mother of seven, has witnessed various monetary and economic changes over her seven years as a vegetable vendor. Each change has affected her business.

“Over the past years, new currencies have been introduced and the economic environment is fast-paced and always changing. I have always had to make adjustments, and many times these adjustments come with losses for my business,” she says.

Most recently, Simbe’s business has been impacted by the sudden introduction of a new local currency. And she isn’t alone.

On April 5, the governor of the Reserve Bank of Zimbabwe, John Mushayavanhu, introduced a new currency called Zimbabwean gold that aims to stabilize the economy. It replaces the Zimbabwean dollar, a local currency that was used in tandem with foreign currencies, including the United States dollar. The US dollar dominates the market and is the preferred currency by many people for remittances and business transactions. Zimbabwean gold, so-named because it is tied in part to the country’s gold reserves, was put into circulation April 30. Ultimately, the country aims to phase out the multi-currency system by 2030 to fully depend on the local currency.

Three economists interviewed by Global Press Journal say that it was necessary to introduce the new currency because people had lost confidence in the Zimbabwean dollar, which led to inflation and its depreciation. The local dollar lost over 70% of its value in the first three months of 2024.

However, the prices of goods and services have increased because the new physical currency in circulation is in short supply. Customers spend less because they have limited access to local cash during the transition.

The shortage also makes it difficult for people to make change on smaller transactions, leading prices to be rounded up to the nearest US dollar. This is because, despite the dominance of the US dollar, in Zimbabwe there are no smaller denominations of that currency than the 1 US dollar bill. Instead, local currency is used as change.

The abrupt change in local currency has made it harder to do business, particularly for businesses like Simbe’s in the informal sector, which makes up 51% of Zimbabwe’s economy and relies heavily on cash transactions.

Amid the confusion, some people are holding on to their US dollars at home rather than depositing them at the bank, stymying the growth of the economy by limiting banks’ capacity to lend money. Coupled with distrust of the government, economists say the new currency has little chance of success due to people’s lack of confidence as well as the government’s decision to restrict its use in purchasing essential services and commodities like fuel, a decision for which it has given no clear explanation.

“For it to work, confidence is key,” says economist Trust Chikohora. “There is a huge gap in confidence in the market.”

Zimbabwean gold is the third local currency the country has introduced in less than a decade in an attempt to decrease inflation. In November 2016, the Zimbabwean government introduced the bond note, which it pegged at par with the US dollar. Over time, the bond note lost value due to inflation and as the number of US dollars in circulation dwindled, people held on to them as a stable store of value. The bond note was replaced by a new Zimbabwean dollar in 2019, which is known informally as a bond note as well. Now, five years later, the currency has been replaced once again.

The Reserve Bank of Zimbabwe did not respond to questions about the transition, nor why it won’t allow Zimbabwean gold to be used to purchase certain goods and services like fuel.

Small-scale traders like Simbe say they have no hope for economic stability with the latest change.

“The new currency is already being affected by inflation and I foresee that it will not work,” she says.

The day after the announcement of the new currency, Simbe says she did not know how to price her goods. They are usually priced under 1 US dollar each, and she uses Zimbabwean dollars for change. But even though the governor had given 21 days to phase out the Zimbabwean dollar, customers were no longer accepting the notes.

“I had to stop selling on the first day as everyone was refusing the bond notes, and on the second day I had no option but to sell,” Simbe says. “Most of my goods are perishables, such as tomatoes and vegetables, and I could not keep hoarding them.”

Like many other informal traders, Simbe started requiring customers to buy a minimum of 1 US dollar’s worth of goods since she could no longer use the local dollars for change. Her total daily sales went down.

“Before the announcement of the new currency introduction, I would make sales of about 15 dollars per day; and after the introduction if I get 8 dollars per day, I consider myself lucky,” she says.

Simbe says the situation forced her, in turn, to refuse Zimbabwean dollars.

“I have nowhere to use them and the US dollar is now dominating the market,” she says.

Admire Machote, a father of three who owns a tuckshop, a small informal grocery shop that he runs with his wife, says they relied on Zimbabwean dollars to trade because it offered smaller denominations than the US currency in circulation. Like many other informal traders, Machote’s business is cash-reliant and he doesn’t use banks. His profits come from items he sells under 1 dollar, he says, so his sales declined when the new local currency was introduced. His customers spent less and their shopping habits changed.

“People are now using the USD to buy basics that amounts to whole figures in USD and so they desist from buying items that require change,” he says.

Machote says he looks forward to more of the new currency being in circulation and hopes that it will fill the gap left by the defunct Zimbabwean dollar, helping business improve.

Tanyaradzwa Chidemo, a teacher, says currency changes in Zimbabwe are always marred by confusion. The recent transition made it difficult to withdraw money from the bank.

“As a civil servant, it brings my life to halt. I want the freedom to be able to access my money, and the government should learn from the past and plan ahead the problems that come with such drastic changes,” Chidemo says.

Other citizens like Perpetua Muziti, an unemployed mother of three, say people need to change their attitudes toward the economic measures.

“The currency is backed by gold and that should instill enough confidence in people to trust these processes aimed at improving their lives. This negativity will only damage our lives,” she says.

Prosper Chitambara, an economist, says the changeover has been met by both optimism and pessimism. Maintaining low inflation rates and building gold reserves over a long period of time will build confidence in the new currency, he says.

“There are a number of economic fundamentals required to stabilize, sustain and instill confidence in the currency,” Chitambara says.

Economist Gift Mugano says the challenge is that the change was announced when the systems were still being set up.

“I know that people couldn’t transact at critical service points — such as hospitals, pharmacies — and it put people into disarray,” he says.

Fellow economist Chikohora adds the new Reserve Bank governor needs to revamp the committee that sets monetary policy, “which will also build confidence in the public.”

Adherence to the monetary policy committee’s stated objectives — such as only issuing Zimbabwean gold notes and coins once they are fully backed by a reserve that includes gold — is key to the new currency’s success, Chikohora says.

Other economists like Chitambara say there is need for regular reporting on and transparency regarding the issue of reserves available, which could allay some of the fears that banks and companies may have.

But Mugano says citizens won’t have confidence in the currency if the authorities themselves seemingly don’t and forbid its use for certain transactions, such as buying fuel.

The reality is that Zimbabwean gold is already as bad as the phased-out Zimbabwean dollar because the economic environment has remained the same, with volatile exchange rates, a thriving black market and high inflation rates, Mugano says.

The introduction of the new currency has not increased people’s disposable incomes, nor has it increased their demand for goods and services in the market, he adds. Instead, it’s a mere cut of zeros on the old currency.

“If government cannot accept their own currency, they are not creating demand for it and that’s a critical issue,” Mugano says.

Chitambara agrees. The fact that people won’t be able to use Zimbabwean gold to buy fuel and pay for other services, such as fees for a new passport, could actually mean that demand for US dollars remains strong, further fueling the black market.

Mugano says comprehensive policies are important for the success of the currency. They can’t be driven only by the central bank to survive. He says other ministries need to cooperate and participate to drive the economy. Every citizen needs to work together to support the new currency, Mugano says, something the country lacks. As long as Zimbabweans don’t work together, the new currency will fail.

“We need good governance in our system,” he says. “We need national cohesion.”

Chidemo, the teacher, remains skeptical and uncertain of the future.

“I will continue keeping my US dollars under my pillow because I have no trust in the banking sector, neither do I trust the governance system to stabilize the economy or the currency,” she says.

Linda Mujuru is a Global Press Journal reporter based in Harare, Zimbabwe.

Global Press Journal is an award-winning international non-profit news publication that employs local women reporters in more than 40 independent news bureaus across Africa, Asia and Latin America.