Zimbabwe's new currency devalues, sparking crisis and panic purchases
In Zimbabwe, the new currency, Zimbabwe Gold (ZiG), introduced half a year ago, has experienced a strong devaluation of 43%, triggering a buying panic and store restrictions. Entrepreneurs warn of bankruptcy, and residents fear a repeat of the 2008 crisis.
At the end of last week, after the 43% devaluation of the new currency Zimbabwe Gold (ZiG), introduced six months earlier, a buying panic erupted in the country. In response, store owners implemented purchase limits to one item per person.
Purchase restrictions in Zimbabwe
As a result of these actions, in most stores starting Monday, it was possible to buy only one carton of milk, one loaf of bread, one bottle of oil, one package of rice, or one can of coffee.
A week ago, trade entrepreneurs warned that selling at the artificially inflated official ZiG exchange rate would lead to bankruptcy. On Wednesday, the managers of the country's biggest supermarket chains, Pick n Pay and OK Supermarket, reported that the implemented devaluation would most likely force them to close their outlets.
Contradictory government assurances
The Zimpricecheck organization, which monitors the retail sector, emphasized that "this sudden change contradicts recent government assurances about the stability of ZiG and its purported gold backing."
The government and the Reserve Bank of Zimbabwe accuse illegal currency traders of the dire ZiG exchange rate situation. However, the fight against them seems ineffective, as police officers sent to the streets sabotage their orders, knowing their salaries are losing value and trying to exchange them as quickly as possible for more stable US dollars.
Retirees are also dissatisfied; their benefits were 13.9 ZiG per USD when the new currency was introduced. With ZiG valued at 24.88 CAD, their pensions are almost halved and arrive additionally with a three-month delay.
Economist Lyle Begbie from Oxford Economics predicts that the devaluation might be inadequate because "inflationary pressure and limited access to international capital markets continue to burden the economy."
Concerns of Zimbabwe residents
Zimbabwe residents fear a repeat of 2008, when the value of one USD reached 100 billion Zimbabwe dollars, and people had to use wheelbarrows to carry their wages. They currently expect their salaries and pensions to be paid in US dollars.
