Zimbabwe’s authorities have been cracking down on the unofficial market for the country’s new gold-backed currency, the ZiG, in a bid to stabilize the economy.
The government has imposed fines for transactions not conducted at the official exchange rate, forcing street dealers to abandon their usual spots and switch to mobile phone messaging platforms to avoid detection.
The crackdown has resulted in a significant decline in visible parallel market activity, according to Lawrence Nyazema, president of the Banker’s Association of Zimbabwe.
Lenders are seeing an increase in formal market activity, indicating a shift towards official channels.
The ZiG, introduced in April, is Zimbabwe’s sixth attempt in 15 years to establish a stable local currency.
The currency is backed by 2.5 tons of gold and $100 million in foreign currency reserves, and the central bank has vowed not to print more notes than can be supported by these reserves.
Previous efforts to launch a local currency were sabotaged by printing money to finance government spending, leading to hyperinflation and collapsing values against the dollar.
Speculation in the unofficial market contributed to volatility, and authorities are now targeting street traders for the demise of the Zimbabwe dollar, which the ZiG replaced on April 5.
The local currency was trading at 13.31 per dollar on Tuesday, up 1.9% from its launch price of 13.56.
Zimbabwe’s crackdown mirrors measures taken by other governments in the region to combat currency depreciation, inflation, and public unrest.
The move is seen as a positive step towards stabilizing the economy, but only time will tell if it will be successful in the long run.
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