HARARE – One year after its introduction, Zimbabwe’s gold-backed currency, the ZiG (ZWG), is facing mounting pressure, with financial analysts warning that it could be on the path to extinction due to limited usage, currency mistrust, and a thriving black market economy.
According to a report by financial news platform Invezz, despite being theoretically backed by 2.67 tonnes of gold and over US$100 million in reserves, the ZiG has seen a dramatic fall in value since its launch in April 2024. The currency has depreciated by as much as 250% on the parallel market, where it trades between 40 and 50 to the US dollar, compared to the official rate of 26.8.
“Zimbabwe’s gold-backed ZiG remains under pressure as usage stays low, with analysts warning of its potential extinction one year after its launch,” Invezz reported.
The stark contrast between the official exchange rate and the black-market rate reflects broader economic and political concerns. Many Zimbabweans continue to favour the US dollar for everyday transactions, with estimates suggesting that more than 80% of financial activity in the country is conducted in foreign currency.
Despite efforts by the Reserve Bank of Zimbabwe to stabilise the local unit, including hiking the benchmark interest rate to 35%—the highest in Africa—the ZiG has failed to gain traction. According to Invezz, the currency’s theoretical strength, bolstered by gold exports worth up to US$3 billion last year and record gold prices currently peaking at US$3,500 per ounce, has not translated into practical trust or use on the ground.
A recent report by Imara Investment quoted by Invezz paints a grim picture of the ZiG’s future:
“The ZiG is fast going into extinction. Its demise won’t be due to the rapid devaluation that doomed Zimbabwe’s previous efforts to establish a local currency but through irrelevance.”
Analysts argue that public distrust in the local currency remains deeply rooted, scarred by previous monetary collapses—including the infamous hyperinflation of the 2000s that led to trillion-dollar banknotes, and more recently, the failure of the RTGS currency.
“Currencies are built on trust, and Zimbabweans don’t have it,” Invezz noted, highlighting that people and businesses continue to convert ZiG payments into USD immediately due to fears of rapid depreciation.
Critics also point out that the currency’s gold and cash reserves are insufficient to back an economy with a gross domestic product (GDP) of over US$35 billion. “It does not have adequate backing,” Invezz said, adding that this imbalance further undermines the credibility of the ZiG.
With confidence in the local currency waning and economic fundamentals remaining fragile, the outlook for the ZiG remains bleak. While the central bank maintains its commitment to the gold-backed model, its success now depends largely on public trust—something analysts say will be difficult to regain without sweeping reforms and consistent policy stability.
