Zimbabwe’s new currency weakened by deepening trade deficit

Zimbabwe’s newly adopted gold-backed currency ZiG has been put to the test of increasing imports that depleted reserves, casting a shadow on the government’s plan to make it the only currency in the country by 2026.

The currency was launched in April 2024 in an effort to mitigate monetary instability and hyperinflation that has plagued the country for decades.

The Zig has so far lost almost 80% of its value on the black market.

The country’s central bank on Thursday said it had injected $64 million into the foreign exchange market this month to address dollar demand.

“Over the past weeks, the Reserve Bank witnessed a build-up in pipeline demand for foreign currency at banks, reflecting transitory foreign currency supply and demand mismatches, thus exerting undue pressure on the foreign exchange market,” central bank governor John Mushayavanhu said in a statement.

Zimbabwe has long struggled with high inflation, with inflation rates exceeding 500% in recent years.

Frequent changes in currency and monetary policy have led to a lack of trust among the population. Many people prefer using stable foreign currencies like the US dollar.