Zimbabwe’s central bank has reported that the country’s newly introduced gold-backed currency, the Zimbabwe Gold (ZiG), now enjoys over 100% reserve coverage, which has been cited as a sign of monetary stability. Despite these developments, skepticism continues to linger among the population, as evidenced by the persistent discrepancy between the official and parallel market exchange rates.
The Reserve Bank of Zimbabwe (RBZ), in its latest policy update, confirmed that the benchmark interest rate would remain unchanged at 35%. This decision was justified by what was described as a relatively stable exchange rate. The central bank further disclosed that total reserves had reached $701 million, underscoring the country’s commitment to maintaining a strong backing for the ZiG currency, which was introduced in April 2024.
It was noted that within just a month of its launch, the share of transactions carried out using the ZiG had climbed significantly, increasing from 26% in April to 43% in May. This surge was interpreted by the central bank as an encouraging signal of adoption. Nonetheless, everyday behavior in Zimbabwe suggests that confidence in the ZiG remains far from universal.
The country’s turbulent monetary history—including episodes of hyperinflation, multiple currency reforms, and economic instability—has led to a widespread reliance on the U.S. dollar for most purchases. This preference persists even with the introduction of a currency that is ostensibly backed by gold. The central bank has acknowledged the importance of overcoming these historical challenges and has promised that strict monetary discipline will guide the future of the ZiG.
Governor John Mushayavanhu, in a written response to inquiries, stated that the central bank viewed ZiG as Zimbabwe’s legitimate national currency. He emphasized the institution’s commitment to upholding the core principles of sound money, such as maintaining the currency’s integrity as a store of value. According to the governor, lessons had been drawn from previous monetary failures, particularly the need to align money supply with economic fundamentals to ensure lasting price and exchange rate stability.
Despite the bank’s declarations, a considerable premium continues to exist in the parallel market, where foreign currency can be exchanged at rates roughly 20% higher than the official figures. This gap indicates ongoing skepticism among citizens, who remain wary of previous currency collapses. Traders on the black market have pointed out that the recent exchange rate stability might be due less to confidence in the new currency and more to a restricted circulation of ZiG notes.
One trader, Pearson Tambudze, remarked that the currency’s scarcity, rather than its strength, might be the primary factor behind its current value in the unofficial market. It was suggested that the limited amount of ZiG available has made it difficult for speculative forces to influence the rate significantly, thereby creating an artificial sense of stability.
International financial institutions, including the International Monetary Fund (IMF), have cautiously welcomed the apparent early signs of currency stability. However, the IMF has also recommended that Zimbabwe implement a series of structural reforms to support long-term success. These include tighter controls on money supply growth, the establishment of a more transparent and accessible foreign exchange market, and concerted efforts to address the country’s significant external debt burden, which currently stands at approximately $12.2 billion.
Meanwhile, Zimbabwe’s Finance Minister, Mthuli Ncube, has expressed cautious optimism regarding the country’s financial prospects. He recently stated that with continued stability in the currency and disciplined monetary policies, Zimbabwe may be able to secure bridge financing of $2.6 billion by the middle of 2026. This funding would be vital for unlocking access to further international credit and reintegrating Zimbabwe into global financial systems.
While the government’s statements suggest a strong commitment to currency reform and macroeconomic stabilization, the enduring lack of public trust in domestic monetary instruments remains a central issue. Most Zimbabweans continue to gauge economic security through the lens of U.S. dollars, a behavior that illustrates the challenges facing any new currency initiative.
As the central bank moves forward with its strategy to build credibility around the ZiG, attention will likely remain fixed on several key indicators: the narrowing of the parallel market premium, the increase in public use of the local currency, and the country’s ability to reduce inflation without relying excessively on interest rate adjustments. Until such changes are visible and sustained, the ZiG’s future will remain tethered not only to reserves and interest rates but also to the hard-earned trust of the people it was designed to serve.
