KEY POINTS
- The ZiG is limited to minor transactions and lacks trust.
- Zimbabwe’s dollar use has surged due to the ZiG’s weakness.
- Analysts doubt the ZiG will survive long in current conditions.
Zimbabwe’s bid to regain monetary control with its gold-backed currency, the ZiG, is faltering less than a year after its introduction. A deepening liquidity crunch and persistent economic instability have led to a growing reliance on the U.S. dollar, rendering the local currency ineffective in most trade sectors.
Launched on April 8, 2023, the ZiG, short for Zimbabwe Gold, was the country’s sixth attempt to replace the dollar since 2009.
But with the currency used for only minor transactions like utility bills, taxes, and partial public wages, its limited application has weakened public trust. The highest denomination note, which is equivalent to about $7.50, barely covers daily essentials like bread, let alone fuel, rent, or medicine.
Independent economist and former monetary policy committee member Eddie Cross said Zimbabwe is now “effectively dollarized,” with the ZiG becoming nearly obsolete in everyday trade. “The liquidity crunch has now killed the ZiG,” he added.
Tight policy measures fail to support ZiG stability
In an attempt to stabilize the ZiG, the Reserve Bank of Zimbabwe devalued the currency by 43 percent in September 2024, increased the interest rate from 20 percent to 35 percent, and tightened cash reserve requirements. Still, the currency has depreciated almost 4 percent since the beginning of 2025.
These moves have done little to restore faith. The Harare Stock Exchange experienced a sharp slump, consumer prices fell by 0.1 percent in March, and the ZiG has remained scarce on the informal market.
The tight monetary stance, designed to shield the currency from inflationary pressures, has instead contributed to reduced economic activity and declining liquidity.
Despite gold and cash reserves totaling more than $550 million, analysts remain skeptical. Jacques Nel of Oxford Economics noted that the currency’s minimal usage makes it indistinguishable from Zimbabwe’s past failed currencies. “It would have taken something special to convince Zimbabweans that this time is different,” he said.
Experts predict short lifespan for the struggling currency
Not even a 30 percent surge in global gold prices since the ZiG’s launch has helped its standing. Hasnain Malik, a strategist at Tellimer in Dubai, attributed the weakness to Zimbabwe’s restricted access to capital markets since its 1999 debt default, calling the reserve levels “woefully inadequate.”
Still, the Reserve Bank insists on sticking to its tight stance. Speaking to business leaders in Harare on February 13, Deputy Governor Innocent Matshe admitted the road ahead would be tough but assured continued commitment to the currency. “It’s going to be a bumpy ride, but we are fully committed,” he said.
However, many experts remain unconvinced. According to NewZimbabwe, Tony Hawkins, a former professor at the University of Zimbabwe, believes that like its predecessors, the ZiG will struggle to survive. “Every new currency in Zimbabwe has a shorter lifespan than its predecessor,” Hawkins said. “I can’t see the ZiG surviving that long.”
