HARARE, Zimbabwe — Zimbabwe’s gold-backed currency, the Zimbabwe Gold (ZiG), is “here to stay” despite a recent sharp devaluation and rising inflation, says Finance Minister Mthuli Ncube.
Speaking to The Africa Report at the InvestAfrica conference in Dubai, Ncube expressed optimism for the ZiG’s resilience, even as scepticism mounts over its stability in the face of Zimbabwe’s challenging economic environment.
The ZiG, introduced as a gold-backed digital currency, was intended to address inflation and currency instability by providing a more secure and trusted store of value. However, a rapid devaluation since its launch has raised questions about its sustainability. Despite these concerns, Ncube remains resolute, asserting that the ZiG is a crucial component of Zimbabwe’s economic strategy and dismissing speculation that it could be scrapped or sidelined.
As inflation continues to climb, many Zimbabweans are turning to foreign currencies, particularly the U.S. dollar, as a safer medium of exchange, reflecting widespread uncertainty in the local economy. However, Ncube argues that the ZiG has the potential to stabilise the currency market and restore faith in Zimbabwe’s monetary system over time. “The ZiG currency is a long-term solution that requires patience. We are working to instil confidence in the currency, and our commitment to it is unwavering,” Ncube stated.
Alongside his defence of the ZiG, Ncube promoted a recently announced $16 billion sovereign wealth fund, a move intended to safeguard national assets and provide financial security for future generations. Critics have questioned the viability of such a fund, especially as Zimbabwe struggles with high debt, liquidity issues, and dwindling foreign reserves. Nevertheless, Ncube asserts that the sovereign wealth fund will provide critical support to the nation’s economic objectives.
“The sovereign wealth fund will ensure that we are not only investing for today but building a financial legacy for Zimbabwe’s future,” Ncube said. The fund is set to derive its income from gold reserves, mineral royalties, and other national assets, though experts warn that without prudent management and transparency, the fund could fall short of its ambitious goals.
Ncube’s promotion of both the ZiG and the sovereign wealth fund is part of a broader strategy aimed at enhancing Zimbabwe’s economic resilience, but the approach has drawn significant scrutiny. Economists point out that the country’s economic instability may deter the trust needed for the ZiG to gain widespread adoption, especially given Zimbabweans’ past experience with failed local currencies.
Despite the government’s optimism, the ZiG has yet to gain widespread acceptance among citizens, with many Zimbabweans wary of yet another local currency after the severe hyperinflation of the early 2000s. Analysts highlight that for the ZiG to succeed, the government must address underlying economic issues, such as corruption, a high cost of living, and lack of transparency in financial management.
“Trust in the local currency cannot be restored overnight, and it will take more than a gold backing to inspire confidence,” says economist John Makoni, who has been closely monitoring Zimbabwe’s financial policies. “People need to see stable policies, transparency, and economic growth for them to embrace a new currency wholeheartedly.”
The ZiG’s future remains uncertain, with its success likely dependent on both domestic and international factors. For the currency to maintain value and build credibility, experts say the government will need to exercise fiscal discipline, control inflation, and ensure gold reserves are genuinely backing the currency. Any missteps could lead to further devaluation, leaving the ZiG vulnerable to the same inflationary pressures it was designed to combat.
However, Ncube remains undeterred, envisioning the ZiG as an anchor for economic recovery and growth. “Our commitment is clear, and we believe the ZiG can act as a stabilising force for the economy. We are dedicated to making the necessary reforms to see this through,” he said in Dubai.
As Zimbabwe navigates a delicate economic landscape, the ZiG represents both an ambitious and risky endeavour to stabilise the country’s financial system. While Finance Minister Ncube maintains that the ZiG is “here to stay,” its future will largely depend on the government’s ability to execute sound economic policies and foster genuine trust among Zimbabweans. In the meantime, Zimbabweans remain cautious, awaiting signs that the ZiG can indeed serve as the reliable currency it was promised to be.