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Government introduces a new local currency to help stabilize exchange rates and prices

  • Key Message Update
  • Zimbabwe
  • April 2024
Government introduces a new local currency to help stabilize exchange rates and prices

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  • Key Messages
  • Key Messages
    • In April, many poor households remain reliant on market purchases to meet their food needs following a delayed start to the harvest, with most farmers also anticipating a significantly below-average to failed harvest. Households are expected to increase their reliance on coping strategies to meet their food needs due to the poor harvest, limited seasonal agricultural labor opportunities, and high food prices, driving area-level Crisis (IPC Phase three) outcomes in typical deficit-producing areas in the south, east, west, and extreme north into the post-harvest period. In typical surplus-producing parts of the Mashonaland Provinces and other areas, Stressed (IPC Phase 2) area-level outcomes are anticipated to emerge as the poor harvest, limited crop sales, and increased competition for income-earning opportunities affect household purchasing power, with some poor households likely to engage in coping strategies indicative of Crisis (IPC Phase 3) to meet their food needs. 
    • On April 3, the President of Zimbabwe declared a national state of disaster following the negative impacts of the El Niño-induced drought on crop production. The declaration allows for the mobilization of national and international resources to support the drought response. Humanitarian assistance by the government, which typically ends in March with the start of the harvest, has reportedly been extended through June 2024. Ongoing official assessments are expected to inform humanitarian programming for the 2024/25 consumption year (April 2024 to March 2025). 
    • Harvesting of the 2023/24 main crops is slowly starting across the country for farmers who did not experience a failed harvest. In May, harvesting activities are expected to increase, although at significantly below-normal levels. At the same time, most wheat farmers are preparing land for winter wheat planting, while a small proportion are reported to have already planted ahead of the official start date in early May. Tobacco sales are also ongoing at auction and contract floors, with record average sale prices per kilogram, partly in response to pressure from farmers over low prices. 
    • On April 5, the Reserve Bank of Zimbabwe introduced a new national currency, the Zimbabwe Gold (ZiG). The structured currency, which is said to be backed by gold and other precious minerals and foreign currency reserves, was pegged at 1 ZiG to 2,499 ZWL (previous currency) and 13.56 ZiG to 1 USD when launched. By mid-April, electronic and mobile money platforms had adjusted to the new currency, while ZiG notes and coins are set to become available from April 30. It will be critical to continue monitoring the markets following the establishment of a new currency. ZIMSTAT has also started a new data series for monitoring the poverty datum lines using the ZiG, with the national average Food Poverty Datum Line per person per month for April assessed to be 425 ZiG and the average Total Consumption Poverty Line at 650 ZiG. According to ZIMSTAT, the April 2024 weighted annual inflation rose to 57.5 percent from 55.3 percent in March, with the month-on-month inflation reducing to 2.9 percent. 
    • As the extended lean season peaks and the below-average harvest begins, most low-income households are increasing their engagement in typical coping strategies earlier than normal to earn income for food purchases and other basic needs. In semi-arid areas, households are selling more livestock than normal, particularly cattle, to earn income and in response to poor pasture conditions and expensive supplementary feeds. Currently, cattle in some areas are sold for less than a third of their normal prices due to increased supply and low demand. Households are also increasing their engagement in petty trade to earn income for food and non-food purchases. However, increased competition for labor opportunities and low liquidity among better-off households are expected to continue limiting earnings for poor households. 
    • Water availability and access challenges, especially in typical semi-arid areas, are also a concern as the rainy season concludes. Declining water resources will likely hinder households’ ability to engage in certain income-earning opportunities, such as vegetable production and sales, brickmaking, and construction, and contribute to livestock poverty deaths through the dry season. Livestock poverty deaths are expected to increase during the upcoming dry season, with a higher possibility of more livestock deaths than last year due to limited access to veterinary services, poor pasture quality, and water scarcity following the El Niño-induced drought.

    Recommended citation: FEWS NET. Zimbabwe Key Message Update April 2024: Government introduces a new local currency to help stabilize exchange rates and prices, 2024.

    This Key Message Update provides a high-level analysis of current acute food insecurity conditions and any changes to FEWS NET's latest projection of acute food insecurity outcomes in the specified geography. Learn more here.

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