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Zimbabwe intensifies crackdown on illicit currency trading to stabilize new ZiG currency

Zimbabwe intensifies ZiG currency stabilization by targeting companies, backed by gold reserves and strict enforcement measures.

By Mackenzie Crow

5/16, 09:51 EDT

Key Takeaway

  • Zimbabwe extends its crackdown on illicit currency trading to companies, aiming to stabilize the new ZiG currency by enforcing official exchange rates.
  • The ZiG, backed by gold and foreign reserves, replaces the depreciated Zimbabwean dollar in an effort to establish a stable national currency.
  • Government actions include arresting over 200 traders and freezing 90 bank accounts involved in illegal transactions, with plans to mandate ZiG for certain taxes.

Crackdown on Currency Trading

Zimbabwe's government is intensifying its efforts to stabilize its new currency, the Zimbabwe Gold (ZiG), by extending its crackdown from street currency traders to companies. Finance Minister Mthuli Ncube emphasized the importance of enforcing the official exchange rate across the entire value chain, from manufacturers to retailers. This move aims to ensure that goods and services are priced solely in the ZiG, as detailed in a statement made to lawmakers and shared on the parliament's website. The financial intelligence unit has been tasked with overseeing this enforcement, marking a significant step in the government's strategy to establish the ZiG as the primary medium of transaction.

Strengthening the ZiG

Introduced on April 5, the ZiG replaces the Zimbabwean dollar, which experienced a significant depreciation of 80% against the US dollar this year before being phased out. The new currency is backed by 2.5 tons of gold and $100 million in foreign exchange reserves held at the central bank, a foundation that the government believes will support its stability and acceptance. Over the past 15 years, Zimbabwe has made several attempts to establish a functioning national currency, but these efforts have often been undermined by a preference for the US dollar. The latest measures aim to ensure the ZiG does not suffer a similar fate.

Targeting Illicit Currency Trades

The government's crackdown has also targeted street currency traders, leading to the arrest of more than 200 individuals and the freezing of 90 bank accounts suspected of being involved in illicit transactions. To avoid detection and arrest, many traders have moved their operations to digital platforms, such as WhatsApp, and now only transact with known clients. This shift underscores the challenges faced by authorities in curbing currency speculation, which Finance Minister Ncube has described as "unjustified" and detrimental to the ZiG's credibility as both a medium of transaction and a store of value.

Legislative Measures and Conclusion

To further bolster the adoption of the ZiG, the government plans to mandate its use for the payment of certain taxes and fees. Details on which taxes will be exclusively payable in ZiG are forthcoming, as the government works on the relevant legislation. This approach reflects Zimbabwe's broader strategy to build confidence in its new currency and ensure its stability in the face of challenges, including currency speculation and the historical preference for the US dollar. By taking a comprehensive approach that includes enforcement along the value chain, targeting illicit currency trades, and legislative measures, Zimbabwe aims to secure the ZiG's position as a reliable national currency.

Management Quotes

  • Mthuli Ncube, Finance Minister of Zimbabwe:

    "What should be done is an enforcement along the value chain, manufacturer, wholesaler up to retailer. I have actually instructed the financial intelligence unit to begin doing that." "Speculation is unjustified." "We are working on that and we will be announcing as to which taxes will be paid only and solely in ZiG currency."