Zimbabwe Gold was introduced last April to replace the Zimbabwean dollar and strengthen the economy. However, this gold-backed currency lost 0.8% of its value within one month and experienced a 43% decline over eight months.
To keep the currency afloat, the government tightened the money supply. Unfortunately, this led to the closure of some businesses and increased unemployment.
For instance, Tongaat Hulett, a prominent local company known for sugar production, announced plans to lay off 1,000 employees. Additionally, companies like Unilever and Choppies Enterprises exited the Zimbabwean market due to these changes.
Consumers have turned to informal markets as a result of the shifting economy. These markets, operating in areas like parking lots and verandas, avoid costs such as energy expenses and taxes that formal retailers face. This has made it harder for traditional stores to compete, potentially leading to more closures.
Despite these challenges, the government remains optimistic. After last year’s drought, improvements in agricultural production and energy generation are expected to drive a 6% growth this year.
However, public trust in the new currency is still low, with many continuing to conduct transactions in U.S. dollars.