One winter morning in 2008, Epiphnia Mudehwe from Mutare, a city in the eastern part of Zimbabwe, boarded a bus to town to withdraw her salary of 1 billion Zimbabwe dollars. The amount sounds impressive, but it was worthless because of the hyperinflation that Zimbabwe was then experiencing. In July that year, the exchange rate had reached ZW$500 billion to $1, making ZW$1 billion worth less than a cent.
Mudehwe’s notes devalued while she was in line at a supermarket, and the midwife was unable to purchase any groceries. The money could not even cover her bus fare and she had to walk three hours to her tiny home in Dangamvura, a densely populated suburb in Mutare, where she lived with her family. Prices of basic commodities at the time were changing every hour, increasing at a meteoric rate.
Mudehwe has seen it all: a strong Rhodesian dollar in the colonial era, a highly sought-after Zimbabwe dollar in the 1980s after independence, the hyperinflation of 2008, and now a new currency introduced in April, called Zimbabwe Gold but known by its acronym, ZiG.
At 62, the mother of four still recalls how strong the Rhodesian dollar was in the late 1970s when she undertook her midwife training in Fort Victoria (now Masvingo), a city in southeastern Zimbabwe. One could buy a meal for several people using just coins.
Born and raised in Mvuma, a small town in Midlands Province, she appreciates her parents looking after her and educating her. Her goal was to finish her postgraduate studies and earn her own salary, as her elders had done. With her first salary in 1980, Mudehwe bought blankets and clothes for her parents. That same year Zimbabwe became independent from Britain.
“I felt like I was dreaming,” she tells New Lines. “My salary was not much, but the money had so much value. I could do a lot with it. By merely looking at the quality of the paper, you could tell that it had value.”
President Robert Mugabe of the ruling Zimbabwe African National Union-Patriotic Front (ZANU-PF) inherited a flourishing economy from Ian Douglas Smith, a Briton who had been prime minister of Rhodesia from 1964 to 1979. The country’s manufacturing industry and efficient agriculture helped to keep the new Zimbabwe dollar strong.
Mudehwe’s situation improved, and by 1992 she was able to buy the four-room house where she is currently staying from the local authority through a housing scheme. She worked at the Dangamvura clinic, a few miles from her home. Mudehwe was excited and planned to renovate the house for her growing family. But her excitement did not last. Zimbabwe’s currency collapsed in November 1997.
This was caused by a combination of factors. When Smith’s government separated from the United Kingdom through the Unilateral Declaration of Independence in 1965, it introduced measures that included guaranteed cheap credit and protection of domestic industries from foreign companies to sustain the economy. Mugabe retained some of these measures, which created problems for his government. Restrictions on foreign investment also contributed to a foreign exchange shortage. In 1990, inspired by the World Bank, Mugabe introduced the market-friendly Economic Structural Adjustment Programme, which liberalized the economy.
This only exacerbated the problems, says Paison Tazvivinga, a Zimbabwean economist based in South Africa, leading to “high unemployment, decreased access to essential services and social unrest … Many people ended up facing a decline in living standards.” Mugabe was forced to spend unbudgeted millions that year in payouts to veterans who had participated in the anti-colonial war against the white minority government.
In 1998, the Zimbabwe dollar lost half of its value in less than two months, following the deployment of Zimbabwean troops to the Congo to support then-President Laurent-Desire Kabila, who was facing a rebellion. The war cost Zimbabwe an estimated $1.7 million a month between 1998 and 2002. This had a heavy impact on the treasury. “It increased our debt levels,” says Tazvivinga, and “affected trade routes and regional economic relations.”
The final nail in the coffin for Zimbabwe’s economy under Mugabe was the eviction of 4,000 white commercial farmers under the land reform program introduced in the 2000s. The farms that were supposed to benefit landless Black farmers ended up benefiting Mugabe, his wife Grace, his allies and political supporters. Grace acquired more than 15 farms, spanning at least 16,000 hectares.
Gideon Gono, then governor of the Reserve Bank of Zimbabwe, issued a ZW$100 trillion note in January 2009, which exacerbated poverty and hunger amid shortages of basic commodities. A month later, the market dumped the Zimbabwe dollar in favor of the U.S. dollar, forcing the government to adopt the latter as the main currency. The multicurrency system was maintained under the government of national unity, a power-sharing deal between Mugabe and the Movement for Democratic Change leader Morgan Tsvangirai.
On April 5, 2024, the new central bank governor, John Mushayavanhu, introduced Zimbabwe Gold, a new currency to replace the beleaguered Zimbabwe dollar, which had lost 80% of its value against the U.S. dollar. The ZiG at the time was said to be backed by 2.5 tons of gold and $100 million in cash reserves.
Mudehwe does not have confidence in the new currency. The grandmother of seven says that her granddaughter showed her 10 ZiG. “That’s the only time I saw it,” she says.
This is the sixth attempt by Harare to introduce a local currency since 2009, when the multicurrency system came into effect. In 2014, the central bank introduced bond coins to resolve change problems. This was followed in 2016 by bond notes which were at par with the U.S. dollar. In 2019 the Zimbabwe dollar was reintroduced along with a ban on the use of foreign currency, after a decade of dollarization.
But the central bank failed to win public trust and in March 2020, amid the global pandemic that worsened the economic crisis, the governor was forced to bring back the multicurrency system.
Many are struggling due to the unstable currency. The case of Mellisah Katyora is typical. The 28-year-old and mother of two runs a small shop that sells mostly women’s clothes at a shopping complex in Dangamvura. She accepts the local currency but pegs her prices to U.S. dollars. “When people want to pay in ZiG we take it at the day’s prevailing rate,” says Kutyora. ZiG is not yet tradable. Katyora, who buys her shop’s wares from neighboring South Africa and Zambia, has to convert all her currencies to U.S. dollars. She says she mostly uses ZiG for change as there are no U.S. coins in circulation. “When ZiG started circulating in April, it was hard to find. But it is getting better now,” she says.
Katyora is not happy about the disparities in the foreign exchange rates. “It is confusing. It distorts prices,” she says, anxiously biting her nails when speaking. Consumers have to deal with different foreign exchange rates. There are different rates for paying using a debit card, mobile money and ZiG notes or coins.
Because of Zimbabwe’s high unemployment rate, the majority of its workforce is employed in the informal sector, where these problems prevail. Formal businesses are forced by the government to abide by the official foreign exchange rate. Many Zimbabweans prefer to buy cheap groceries and clothes from people who sell from the trunk of their cars in the streets and not formal businesses.
Rashweat Mukundu, a social commentator and human rights activist based in Harare, says that Zimbabweans have lost confidence in the local currency because of the central bank’s lack of consistency. “Regardless of efforts by the government, there is clarity that the trauma that they went through from 2007 when they lost their savings when they faced the total collapse of the Zimbabwe dollar is still imprinted in the national psyche,” he says.
These crises are having a broader impact. The country’s health sector has deteriorated, the education sector is underfunded and people are struggling to buy basic commodities. The government blames decades of sanctions while the U.S. Embassy in Harare maintains that the sanctions are targeted and have no economic impact. The Zimbabwe Democracy and Economic Recovery Act of 2001 sanctioned Mugabe and some top officials over gross human rights violations. After pressure from regional leaders and the Zimbabwean government, President Joe Biden lifted sanctions initially imposed by President George W. Bush in 2003 and, in March this year, instead placing Magnitsky Act sanctions on 11 Zimbabweans and three entities, including President Emmerson Mnangagwa, for their involvement in corruption and human rights abuses.
But while the international sanctions were aimed at stopping political leaders and specific sectors from profiting from corruption, they ended up hurting the local economy. According to Tazvivinga, they led to “a decline in foreign investment and reduced access to the international market.” He adds: “They exacerbated an already struggling economy which also contributed to hyperinflation in the late 2000s and widespread poverty.”
The instability of Zimbabwe’s currency remains a grave concern even for the younger generations. Tatenda Mitchell Kupara, 18, a high school student from Dangamvura, says she prefers to have her savings in U.S. dollars. “I am used to the U.S. dollar because I can reliably budget with it unlike ZiG,” she tells New Lines. “When the ZiG came, I had some Zimbabwe dollar notes. They all became worthless so I had to throw them away.” She says she often faces issues of getting change when commuting to school. “I am supposed to pay 50 cents but I end up paying a dollar because the bus driver does not give you change,” she says. “The money I am supposed to use for the whole week ends up lasting just half.”
This frustration is common among young people, reflecting a broader despair over the state of the economy.
Despite this frustration, the ZiG remained stable from its launch in April to September on the official market. It was introduced at 13 ZiG to $1 and officially it trades at 14. However, on the black market the rate plummeted to 24 ZiG to the dollar in early September, underscoring the gap between official figures and reality. This forced the central bank to devalue the ZiG by 43% on Sept 27. But prices of gold, a commodity authorities claim is backing the ZiG, have been surging for the past few months. From Sept. 27, the ZiG has been trading at 24 to $1. On the black market the rate has gone up to 50 ZiG to $1. Civil servants who had just been paid in local currency by the government lost their income. The devaluation of the ZiG triggered panic buying and shortages of basic commodities.
The macroeconomic conditions the ZiG is being introduced under are no more favorable than in the past. Dilapidated infrastructure, food insecurity, unproductive factories, underperforming agriculture, extreme poverty and chronic unemployment all contribute to the economic malaise. And the government itself does not have confidence in its currency. Most of its services, including passports and customs duty taxes, are charged for in U.S. dollars.
Victor Bhoroma, an economist based in Harare, tells Three Generations, One Crisis that the viability of the ZiG, just like all other currencies, largely depends on whether the central bank can stop quasi-fiscal operations, like lending to commercial banks for onward lending at artificially low rates, lending to state entities and funding particular economic activities like gold and tobacco production.
There is no efficient foreign exchange market through which suppliers and customers can approach commercial banks to buy and sell foreign currency. Businesses and individuals have been struggling to access foreign currency in commercial banks since the introduction of ZiG in April.
Bhoroma says that for the new currency to be sustainable, “there have to be reforms in order to ensure that there is a market-driven foreign exchange system where banks are the matchmakers.”
A national debt of around $22bn is also a threat to Zimbabwe’s economy. The country owes over $14 billion to international creditors including the World Bank, according to the African Development Bank. Creditors stopped lending to Zimbabwe after it failed to service its debts in the late 1990s. Efforts to restructure the debt are likely to collapse following a flawed 2023 election. The U.S. pulled out of the debt restructuring process early in January citing election irregularities.
The situation is not sustainable, says Bhoroma. Not while Zimbabwe has “economic growth of probably 3%, whilst money supply is growing at a rate of over 500% per annum,” he says. Because half of the government budget is funded by the central bank and the overdraft facility is abused, the source for ZiG is a bottomless pit, creating artificial demand for foreign currency. “There is no way ZiG can be stable or the foreign exchange rate can be stable.”
Many people in the informal sector like Katyora do not bank their money but prefer to keep it under their pillow. If there is no confidence in the banking system, then ZiG has no viability, says Bhoroma.
After the release of ZiG, the government pressured people to accept the local currency. It crafted laws forcing businesses to use the official foreign exchange rate while the bank’s officials and ZANU-PF politicians intimidated individuals and companies to embrace it. Authorities arrested illegal money changers who control the black market, charging them with money laundering. But such heavy-handed tactics have further eroded trust in the new currency, says Mukundu.
Kupara struggles to understand finance at school and at home because of the confusion and disorder caused by Zimbabwe’s currency crisis. She wishes for a stable local currency. “Consistency is key,” she says, adding that she will study information technology at university. Mudehwe, on the other hand, has abandoned her house renovations after the country’s currency ruined her plans. “My children will complete it,” she says.
Zimbabweans have shown remarkable resilience but an unstable currency has left a deep and lasting impact across generations. It has shattered the plans of older citizens like Mudehwe, forcing them to leave the future in the hands of their children. It has made it impossible for the likes of Katyora to earn a decent livelihood. Even youth like Kupara feel defeated and confused. Unless Zimbabwe succeeds in restoring confidence in the local currency, these struggles may yet be passed on to future generations.
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