HARARE, – Zimbabwe’s ruling party spokesperson, Chris Mutsvangwa, has called for the country’s gold-backed currency, the Zimbabwe Gold (ZiG), to be established as the sole legal tender, amid ongoing efforts to stabilize the nation’s turbulent economic landscape.
Mutsvangwa’s bold proposal comes as Zimbabwe grapples with currency instability, economic challenges, and a brain drain, all of which have compounded the country’s financial woes.
Addressing a press conference in Harare, Mutsvangwa stated that the adoption of ZiG as the sole legal tender would reinforce confidence in the currency and consolidate its position as the foundation of Zimbabwe’s economic and financial system. He argued that such a move would provide long-term macroeconomic stability and address the persistent inflation that has plagued the country.
“The Zimbabwe Gold (ZiG) currency should be established as the sole legal tender,” said Mutsvangwa. “This would not only inspire confidence in the currency but also strengthen its position as the cornerstone of our economic and financial structure. It’s time for Zimbabwe to take control of its monetary policy, reduce dependency on the US dollar, and leverage the value of our own gold reserves to stabilize the economy.”
The call for ZiG to be the sole legal tender comes against the backdrop of a deepening currency crisis. The ZiG, introduced earlier this year as Zimbabwe’s sixth currency in 15 years, was initially seen as a bold reform aimed at combating hyperinflation and restoring stability. Backed by gold reserves, the currency was expected to offer Zimbabweans a stable alternative to the country’s volatile Zimbabwean dollar (ZWL) and its over-reliance on the US dollar.
However, the ZiG has struggled to gain traction. The currency, which began trading on April 8, has experienced a steady decline, falling almost 3% to 13.96 per US dollar, its longest losing streak since its introduction. On the parallel market, the exchange rate is even worse, with the local unit trading between 16 and 26 per US dollar, according to ZimPriceCheck, a website monitoring both official and unofficial exchange rates.
Hon Chris Mutsvangwa calls for the ZiG to be established as the sole legal tender in the country. This would not only reinforce confidence in the currency but also consolidate its position as the bedrock of the nation's economic and financial system.
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Despite its gold backing, the ZiG has not been able to shield Zimbabwe from renewed exchange rate volatility, with many citizens preferring to hold foreign currencies like the US dollar, which are perceived to be more stable. This has resulted in a dual-currency economy that has further complicated efforts to control inflation and restore confidence in the local currency.
Mutsvangwa’s proposal to establish the ZiG as the sole legal tender is seen as a bold move to address Zimbabwe’s monetary troubles. By eliminating the use of other currencies, particularly the US dollar, Mutsvangwa believes Zimbabwe can regain control of its monetary policy and curb inflation, which has wreaked havoc on the economy for decades.
“The use of foreign currencies, particularly the US dollar, has only deepened our dependency on external economies and undermined the value of our own currency,” said Mutsvangwa. “The ZiG is backed by our country’s gold reserves, and it should be the sole legal tender to strengthen our economy and prevent further capital flight.”
He added that having a single currency would simplify the financial system, reduce market distortions, and encourage local and foreign investments in Zimbabwe’s gold reserves. Mutsvangwa also emphasized that the move would align with global trends, where countries are increasingly exploring commodity-backed currencies to hedge against inflation and market volatility.
Mutsvangwa’s comments come on the heels of recent statements from the World Bank, which has called for at least 12 months of uninterrupted macroeconomic stability to advance Zimbabwe’s debt restructuring talks with international creditors. Zimbabwe owes over $21 billion, and its debt resolution efforts have been hindered by the country’s ongoing economic instability, including currency volatility.
Victor Steenbergen, senior country economist for Zimbabwe at the World Bank, told delegates at an economic summit in Victoria Falls that a period of stability would “do wonders” for debt negotiations and could provide the foundation for short-term economic stabilization.
“We really think that fiscal policy can be the anchor for macroeconomic stability. Zimbabwe needs a period of uninterrupted stability to move the dialogue forward with its creditors,” Steenbergen said.
The World Bank has supported Zimbabwe’s efforts to clear its arrears and resolve its debt, but the instability of the local currency has complicated these efforts. The bank has urged broader economic reforms, including addressing external liabilities and restructuring the country’s debt, which it described as “unsustainable” in its current state.
The instability in Zimbabwe’s currency markets has also contributed to a worsening brain drain, with thousands of skilled professionals leaving the country in search of better opportunities abroad. Former opposition leader Nelson Chamisa recently proposed a “Citizens’ Affairs Plan” aimed at addressing the brain drain and ensuring that Zimbabwe’s educational achievements translate into real economic and social progress.
Chamisa pointed out the disconnect between the educational system and job market, noting that despite producing thousands of graduates each year, Zimbabwe lacks the infrastructure and economic growth to absorb these trained professionals. This has resulted in a significant loss of human capital, with many young Zimbabweans either leaving the country or struggling to find employment.
“We produce graduates, but we have no viable market absorption plan to cater for the trained professionals we produce year in and year out,” Chamisa said. “Only by implementing a radical, inclusive citizens’ affairs plan can we transform educational achievements into tangible growth and prosperity for all.”
Mutsvangwa’s call to establish the ZiG as the sole legal tender could potentially address some of these concerns by providing a more stable economic environment that would encourage investment and job creation.
Despite Mutsvangwa’s optimistic outlook, there are significant challenges ahead. The Zimbabwean economy remains fragile, and convincing citizens and businesses to fully adopt the ZiG may prove difficult, especially given the currency’s recent slump against the US dollar. Additionally, international creditors may remain cautious until they see tangible evidence of sustained macroeconomic stability.
The Reserve Bank of Zimbabwe (RBZ) has been working to crack down on the parallel market, but the gap between the official and unofficial exchange rates has persisted, further undermining confidence in the local currency. The RBZ Governor, John Mushayavanhu, has doubled down on efforts to stabilize the exchange rate, but many Zimbabweans remain skeptical.
Zimbabwe’s currency woes are deeply rooted in its history of hyperinflation, economic mismanagement, and a lack of trust in financial institutions. Mutsvangwa’s proposal to establish the ZiG as the sole legal tender is a bold attempt to regain control over the nation’s monetary system, but it remains to be seen whether the country can overcome the structural challenges that have long plagued its economy.
As Zimbabwe prepares to navigate these economic reforms, the success of the gold-backed ZiG could hold the key to restoring confidence in the country’s financial system and fostering long-term growth and stability. For now, Zimbabweans, international creditors, and investors alike are watching closely to see whether this latest push for currency reform will deliver the stability and prosperity the country so desperately needs.