People in Zimbabwe are anxiously awaiting currency reform

Inflation, economic downturn, black market: Zimbabwe has many problems. Now a currency reform should ensure calm. But many people doubt that this will work.

“Fare fares have increased. We now have to pay one US dollar for each short journey and not 50 cents as before! And the transport companies refuse to accept the old currency.” Many people in Zimbabwe are feeling the same way as the young woman in the capital Harare.

Since the government announced a currency reform out of the blue two weeks ago, there has been great uncertainty. Banks, shops, mobile phone providers, electricity and water suppliers were just as surprised as citizens.

At the end of April the Zimbabwe dollar will be over

Prices are rising and the Zimbabwe dollar is rapidly losing value. Because the old currency will be taken out of circulation at the end of April. Anyone who has not managed to exchange or spend their cash by then can write off their savings.

What exacerbates the chaos: The new currency “Zimbabwe Gold”, abbreviated ZiG, will not be available until April 30th. “The current mess could have been avoided if the government had explained to people in advance how the new currency works and how to use it,” believes student Danet Ngulube.

The black market is developing splendidly

Banking was virtually impossible for days. Credit cards and online banking suddenly stopped working, according to reports from Harare. The black market is flourishing on the streets. Bundles of old Zimbabwe banknotes are being exchanged for US dollars or South African rands, at significantly worse rates than the government has officially set.

Banks only change cash if there is proof of origin. But hardly anyone can present this because most people have been conducting their business bypassing the state for years.

“Pillow or mattress as a bench”

Economist Gift Mugano is convinced that many citizens do not trust politics because they have not only lost a lot of money in the five previous currency reforms since 2008, but also their pensions, their health care and their life insurance.

“There is a large informal financial sector, which is something like an economy in itself, its own country. 70, 80 percent run through it, and this sector doesn’t care at all about financial policy,” explains Mugano. “People use their pillows or their mattresses as a bank, that’s where they keep their money. For them, only cash counts, only cash. They don’t care whether the central bank has reserves in gold or US dollars.”

Gold and diamonds are said to support the new currency

But it is precisely these reserves on which Zimbabwe is pinning all its hopes. Two and a half tons of gold and other valuable raw materials such as diamonds are intended to guarantee the value of the new currency, strengthen confidence in the ZiG, slow down galloping inflation, stimulate the economy and reduce the share of the US dollar.

Financial expert Happiness Zengeni believes the government plan can work. “It could work, at least in the short term, if they remain disciplined and don’t print any new money. And they have to make sure that the new currency can be exchanged for US dollars.”

Big worries about Independence Day

The country’s central bank promises to do everything to ensure that the ZiG remains stable. However, people have their doubts about it.

“The central bank should not have given an expiry date for the old currency. Because it is no longer accepted on the market,” complains a market visitor. “That’s unfair. You can’t throw away the old thing you have before the new one arrives. But that’s exactly what our central bank did.”

So there are great concerns in crisis-ridden Zimbabwe. The country actually has reason to celebrate. This week marks the 44th anniversary of Independence Day.