HARARE – Zimbabwe’s plan to revert to a mono-currency system earlier than initially announced is creating uncertainty and undermining confidence in the Zimbabwe Gold (ZiG) tender, according to the Zimbabwe National Chamber of Commerce (ZNCC).
The ZiG, a gold-backed currency introduced in April 2024, was intended to bolster economic stability in the face of persistent inflation and currency instability.
The southern African nation, which has experienced five currency collapses since 2000, announced in October 2023 that it would maintain a basket of foreign currencies, including the US dollar, until December 2030. However, in July 2024, President Emmerson Mnangagwa suggested that strong performance of the ZiG could pave the way for a return to a mono-currency system by 2026.
According to The Zimbabwe Mail, ZNCC raised concerns in a recent newsletter that this shift is discouraging households and businesses from holding onto ZiG for extended periods. “With the government being the largest employer and the ZiG essentially functioning as a ‘small change,’ civil servants, other employees, and employers—whose incomes are predominantly in ZiG—face challenges,” the publication quoted the ZNCC as saying.
The ZNCC noted that despite earning in ZiG, many Zimbabweans must pay for essentials such as transportation, fuel, rent, and groceries in US dollars, which remain cheaper and more stable. As a result, “many are offloading their ZiG earnings on the parallel market, irrespective of the prevailing rate, while others are offloading their ZiG balances on the formal market, taking advantage of the rate differentials.”
Economic Challenges and Currency Pressures
The ZiG was launched at a rate of 13.5 per US dollar, but its value has faced significant pressure. In August, market forces led to a 43% devaluation by late September. By December 9, the currency had weakened further to 25.6 to the US dollar on the formal market, while on the parallel market, it traded between 35 and 40, according to Zimpricecheck, an online platform monitoring local markets.
Commenting on the country’s foreign currency reserves, ZNCC highlighted serious vulnerabilities. As of October 31, official reserves stood at $540 million, insufficient to cover even one month of imports, which amounted to $835.8 million. Exports for the same period were valued at $698.1 million.
“This means the country’s official reserves are insufficient to cover even one month’s import bill, raising serious concerns about the sustainability of the nation’s foreign currency management and the goal of exchange rate stability,” ZNCC noted.
Policy Implications
The ZNCC’s warnings come at a critical juncture for Zimbabwe’s monetary policy. Analysts argue that while the ZiG tender was designed to restore faith in the local currency, inconsistent policy signals and structural economic challenges are undermining its effectiveness. The early return to a mono-currency system, they say, could exacerbate market instability and erode confidence further.
As Zimbabwe navigates these economic hurdles, policymakers face the challenge of balancing short-term stability with long-term monetary independence. The ZNCC’s concerns underscore the need for transparent and consistent policy measures to address these pressing issues.
