By Enyichukwu Enemanna
Zimbabwe’s central bank says the country’s gold-backed currency now has more than 100% reserve cover and is stable, but investors have raised doubts over its credibility as they instead place premium in the parallel market.
The Reserve Bank of Zimbabwe on Monday kept its benchmark rate unchanged at 35%, citing a stable exchange rate as one of the reasons, and reported total reserves of $701 million.
The bank said the volume of transactions carried out using the Zimbabwe Gold (ZiG) currency increased to 43% in May from 26% in April 2024, the month it was introduced.
“ZiG is our national currency, and as the central bank, we are committed to ensuring its success by maintaining all the fundamental characteristics of sound money, including its function as a reliable store of value,” Governor of the Reserve Bank, John Mushayavanhu, said in response to inquiry by newsmen.
Arising from decades of economic instability and currency devaluations, most Zimbabweans rely on the use of the U.S. dollar for most purchases.
Authorities are, however, hopeful that the ZiG’s gold currency will give Zimbabweans the confidence to adopt it for their everyday transactions.
“The Reserve Bank has learned from previous currency failures that maintaining optimum money supply and ensuring monetary stability is vital,” Mushayavanhu added.
Despite the bank’s optimism, the gap between the official exchange rate and parallel market rate remains about 20%.
“The rate has been stable for more than three months,” black market trader Pearson Tambudze said, attributing the stability to a scarcity of the local currency rather than restored confidence. “There isn’t a lot of ZiG in the market,” he said.
The International Monetary Fund has welcomed the ZiG’s stability but urges Zimbabwe to adopt tighter money-growth limits, a more transparent foreign exchange market, and to make progress on clearing an estimated $12.2 billion in external arrears.
Finance Minister Mthuli Ncube last month expressed hope that currency stability and appropriate monetary policy would enable Zimbabwe to raise $2.6 billion in bridge finance by mid-2026.
Despite these assurances, investors, however, remain cautious. “We wouldn’t invest in Zimbabwe at the current stages. The country needs to have a lot more development before we would consider it,” said Jetro Siekkinen at LGT Capital Partners.
