HARARE,– Zimbabwe’s government is committed to ensuring that its recently launched currency, Zimbabwe Gold (ZiG), remains fully backed by reserves, the central bank governor announced on Wednesday. This strategy aims to build public trust in the nation’s sixth attempt at establishing a stable local currency in 15 years.
The introduction of ZiG in April follows a series of hyperinflation crises under former leader Robert Mugabe. The previous currency, the Zimbabwean dollar (Zimdollar), saw an 80% depreciation in its final three months before being phased out. Convincing the population to move away from transacting in foreign currencies remains a significant challenge for the authorities.
“Confidence can only come with us walking the talk,” Governor John Mushayavanhu told Reuters, emphasizing the central bank’s commitment to not printing money for government spending, a key factor in past currency failures.
Mushayavanhu outlined a plan through 2030 to increase the use of ZiG and bolster gold and foreign exchange reserves, which have grown from $285 million at the currency’s launch to over $380 million. Currently, ZiG is used in about 20% of local transactions, compared to 80% for foreign currencies.
“We want to gradually tilt that ratio to 70:30 by year-end or 60:40 thereafter, until we get to a situation where everybody is indifferent as to which currency they are using. This is the roadmap,” Mushayavanhu explained.
Despite government claims of increasing ZiG usage, there have been widespread reports of currency shortages in shops. Mushayavanhu assured that sufficient ZiG notes have been printed to meet public demand and that the bank’s reserve accumulation strategy could accelerate with rising commodity prices.
The central bank has been converting mining royalties into gold, aiming to increase reserves to 3 tons by year-end, up from 2.5 tons in April. Authorities expect inflation to end the year around 5%, aligning closely with the International Monetary Fund’s (IMF) estimate of 7%.
“For the first time, our numbers are almost aligned to those of the IMF,” Mushayavanhu noted. “Let’s embrace our new currency and make it work.”
Source: Reuters