Air Zimbabwe is now accepting the recently introduced local currency, the Zimbabwe Gold (ZiG), for bookings and payments.
Air Zimbabwe accepting the new currency however has been met with skepticism by some who doubt its wider adoption due to the government’s own reluctance to use it and what some believe is companies cashing in by charging exorbitant rates.
Experts argue that the Reserve Bank of Zimbabwe (RBZ) must defend ZiG on the open market and not arrest people.
This comes after dozens of illegal money changers were arrested a few days ago in Harare.
The ZiG was introduced in February 2024, aiming to curb inflation and stabilize the economy. However, its acceptance has been limited, with essential services like passport fees and fuel still denominated in US dollars.
Hopewell Chin’ono, a Zimbabwean journalist, applauds Air Zimbabwe decision but argues that for the ZiG to be successful, it needs wider government backing.
“This is a positive development that could benefit the local currency if adopted widely by the whole economy,” Chin’ono said.
He noted the importance of the government accepting ZiG for all transactions, highlighting the lack of trust this creates for businesses.
Peter Mutasa, a political activist points out the vast difference between the quoted price in ZiG and US dollars for a flight to Johannesburg.
Mutasa highlights the discrepancy between the official exchange rate and the exchange rate effectively offered by Air Zimbabwe terming it “propaganda.”
With most businesses allowed to charge exclusively in USD being linked to the ruling party, Zanu-PF, the government’s own actions, seem to contradict its goals.
Experts warn that the gold backed currency will not gain traction and may even become worthless if the government fails to accept it for all transactions.
Commenting on his X handle, economist Tinashe Murapata argues that the velocity of ZiG circulation is much higher than gold.
He says that unlike gold, people spend ZiG quickly to avoid holding it. This effectively increases the money supply, leading to inflation or currency depreciation.
Murapata said that with ZiG becoming the main supermarket currency, people prefer holding goods over ZiG due to low interest rates. This, according to him, weakens ZiG compared to foreign currencies.
He added that restoring trust and confidence in the monetary system is crucial.
“To understand the frenzy to clear everything in the supermarkets using ZiG is to understand three critical ideas in monetary economics;
“(i) Velocity of circulation. While RBZ believes ZiG is backed by gold, ZiG velocity of circulation is not gold but ZWL. With Gold, a consumer can hold off purchases until a week later, whereas with ZiG, they must be rid off as quickly as possible. A high velocity increases money supply at a fixed stock of money. Either the exchange rate must depreciate or prices in ZiG must increase.
