Forbes Africa Weighs In on Zimbabwe's New Currency.
The experts from Forbes Africa talks about the ZiG, Zimbabwe's new currency. Here's what they are saying: (I bet you didn't know they had a Forbes Africa, don't feel bad, none of us knew.)
Zimbabwe recently launched its new gold-backed currency, ZiG, as a means of bringing stability to its volatile financial landscape after decades of economic turmoil. However, experts warn that the road ahead for ZiG is fraught with challenges, with doubts lingering over its ability to enact meaningful change without systemic and governmental shifts to match.
According to renowned economic analyst Daniel Silke, relying solely on the currency to resolve Zimbabwe's economic struggles should be approached with caution. While a new currency may provide temporary relief, lasting stability can only be achieved through comprehensive economic and political changes. In an interview with FORBES AFRICA, Silke stresses that a new currency is merely a band-aid solution and not a cure for the underlying issues. His comparison emphasizes the deeper structural problems within Zimbabwe's economy, emphasizing the importance of systemic change rather than just revamping the currency.
Independent political and risk analyst Marisa Lourenço shares similar concerns as Silke regarding ZiG's potential impact on inflationary pressures. She expresses skepticism, given Zimbabwe's history of currency failures, and stresses that a mere currency change will not suffice. Lourenço emphasizes the need for building reserves, establishing long-term monetary policies, and addressing corruption as fundamental measures to tackle the root causes of economic instability. In an interview with FORBES AFRICA, she asserts that printing money has previously led to increased inflation in Zimbabwe, highlighting the intricate relationship between monetary policy and inflation dynamics. Therefore, it is uncertain whether ZiG will offer the desired solution to the country's economic challenges.
Against a background of doubt regarding the Zimbabwean government's competence in monetary management, the arrival of ZiG is significant. According to Lourenço, maintaining long-term credibility for ZiG necessitates a stable monetary policy. She advocates for a market-driven approach to determine the value of the currency and cautions against excessive interference by the central bank. "A steady monetary policy and liberalized currency regime are vital," Lourenço stresses, highlighting the significance of market-driven mechanisms.
ZiG is facing a significant obstacle in coexisting with other currencies, specifically the United States dollar, which continues to be extensively utilized in financial transactions. Silke points out the overwhelming prevalence of the U.S. dollar and the complexities of replacing it, especially in Zimbabwe where an unregulated parallel market exists. Lourenço further notes that due to Zimbabwe's history of unstable currency situations, promoting the adoption of ZiG may prove to be a demanding task.
There are also concerns regarding the sufficiency of gold reserves to support the new currency. According to Lourenço, external aid is necessary for Zimbabwe's government to tackle its significant debt arrears. Nevertheless, she emphasizes that implementing democratic freedoms and stable monetary policies are crucial for rebuilding trust in ZiG's stability. "Zimbabwe is in urgent need of international assistance to address its overwhelming debt arrears," Lourenço states, underscoring the importance of foreign support. However, she warns that without fundamental reforms, Zimbabwe could face difficulty in overcoming its economic struggles and gaining confidence in ZiG.
Despite these challenges, Silke remains cautiously optimistic about Zimbabwe's future. He suggests that the road ahead may be challenging, but positive changes are possible if the government is committed to meaningful reforms. According to Silke, “Zimbabwe has the opportunity to turn things around, but it will require bold leadership and decisive action.” Lourenço agrees, emphasizing the importance of international cooperation and political will to help Zimbabwe recover.
