Zimbabwe launched the gold-backed ZiG (Zimbabwe Gold) currency in April 2024 as a solution to the country’s persistent inflation crisis, which was meant to reduce reliance on the US dollar, which has dominated Zimbabwean transactions for over a decade. However, less than six months in, the ZiG has already lost nearly half of its value, calling into question whether Zimbabwe’s latest attempt at establishing a local currency can truly weather its economic storms.
For decades, Zimbabwe’s economy has been plagued by hyperinflation, mismanagement, and reliance on foreign currency, particularly the US dollar. The Zimdollar, which was initially scrapped in 2009, had suffered a spectacular collapse under the weight of hyperinflation, leading to surreal scenes where basic items cost millions of Zimdollars. When the government reintroduced the Zimdollar in 2019, high inflation continued to erode its value, making it difficult for Zimbabweans to trust their local currency.
To break this cycle, the Reserve Bank of Zimbabwe (RBZ) introduced the ZiG currency in April 2024. Backed by Zimbabwe’s vast gold reserves and pegged to the value of gold, the ZiG was designed to appeal to a population weary of volatile local currency. The government claimed that the ZiG would be the key to stabilizing Zimbabwe’s economy and reducing the country’s reliance on the US dollar.
Despite these assurances, the ZiG has struggled to establish stability. Just a few months after its launch, the currency depreciated sharply, losing 43% of its value against the dollar in late September. By October, the currency continued its decline, with the unofficial exchange rate reaching up to 50 ZiG per US dollar, far exceeding the official rate.
This gap between official and black-market exchange rates reflects a widespread lack of confidence in the ZiG. Street vendors and small businesses have avoided the currency, preferring to transact in US dollars, which remain the most stable option for many. Even the Grain Marketing Board and civil servants receive payments in US dollars, indicating that the government itself has reservations about relying solely on the ZiG.
The answer lies in both structural and economic challenges. First, the multicurrency system allows Zimbabweans to use either the ZiG or the US dollar for transactions. This choice has led to significant fluctuations in demand for the ZiG, as many people favor the stability of the dollar, resulting in currency devaluation.
Additionally, the government’s strategy to enforce the ZiG has been inconsistent. While some taxes are collected in ZiG, many transactions—especially salaries and pensions—are still paid in US dollars, preventing the ZiG from gaining traction as the primary currency. Zimbabwe’s decision to retain a multicurrency system until 2026 has created a divide, with citizens and businesses skeptical of a currency that the government itself seems hesitant to fully commit to.
Experts argue that, with consistent government policy and gradual integration, the ZiG might still succeed. This will involve strengthening measures to support the currency, such as increasing tax collections in ZiG and demonstrating its reliability in everyday transactions. While RBZ Governor John Mushayavanhu remains optimistic about the ZiG’s future, he acknowledges that convincing Zimbabweans to trust the currency remains a significant challenge.
However, the government must tread carefully. Zimbabwe’s economic history has left citizens wary of promises regarding local currency, and any attempt to rush the ZiG as the sole currency could further strain public trust and exacerbate economic hardship.
For Zimbabwe to fully establish a stable currency, it must address the core issues driving inflation and currency volatility, from currency supply controls to consistent economic policy. Only then can Zimbabweans begin to feel secure in a local currency that they can trust for long-term savings and transactions.
In the short term, it appears Zimbabwe’s government will continue to battle on multiple fronts to win back public confidence in the ZiG. With resilience and a cautious approach, the ZiG might eventually gain traction and help Zimbabwe move toward a more stable economy—but only if the nation’s leaders and citizens align in their vision for the future of their currency.
