After repeated currency crises, Zimbabweans remain cautious about adopting the ZiG.
Harare, Zimbabwe – The government is attempting to encourage citizens to use its own currency, the Zimbabwe Gold (ZiG), more widely to reduce reliance on the US dollar. However, after years of currency instability, many are hesitant to trust this latest initiative.
The ZiG was introduced in April 2024 as part of the government's effort to restore confidence in the local currency. The Reserve Bank of Zimbabwe (RBZ) claims the currency is backed by foreign currency and precious metal reserves, including gold.
The challenge extends beyond merely introducing a new currency or strengthening its reserves. Zimbabweans, who have experienced significant losses in savings and wages due to successive currency crises, are cautious about holding money in a currency whose purchasing power they fear could decline.
Zimbabwe abandoned its local currency in 2009 following hyperinflation and adopted a multicurrency system dominated by the US dollar. A domestic currency was reintroduced in 2018, but repeated instability has made it difficult to rebuild public confidence.
Charles Mbwandarikwa, a primary school teacher, shares his concerns. He receives about a third of his salary in ZiG and exchanges it quickly rather than holding onto it, citing past losses when Zimbabwe's previous currency collapsed. He lost his pension savings during the 2009 crisis, and when the local currency was reintroduced in 2018, his salary's value fell from the equivalent of $540 to $40 by the end of that year.
These experiences illustrate why official assurances regarding the ZiG have not necessarily led to increased confidence among earners.
To strengthen the currency's credibility, the RBZ introduced an upgraded series of ZiG banknotes with revised designs and security features on April 7. According to the RBZ, annual ZiG inflation was reported at 3.7 percent last month. However, low inflation alone does not guarantee that people will choose to save in the currency or use it for daily transactions.
Economist Cornelius Dube notes that demand for the ZiG remains weak. "ZiG has to be available in a ratio relative to its demand. Demand for ZiG is currently very subdued," he states.
For businesses, customer acceptance of the currency is a practical test of its potential role in the economy. Clothing retailer Sesedzai Chigumira reports limited sales in ZiG, reflecting the challenge of encouraging wider use of a currency when customers and businesses prefer to transact in US dollars.
The government's efforts to reduce dollar dependence face a broader challenge: the existence of gold and other mineral resources does not guarantee confidence in a currency. People must believe that it will retain its value and be useful for purchasing goods, meeting expenses, and saving for the future.
If businesses expect customers to prefer dollars, they may hesitate to price goods or accept payments in ZiG. Consumers, in turn, have little incentive to hold the local currency if they fear its value could decline. This creates a cycle that policy measures alone may struggle to break.
The RBZ has shifted from its previous goal of adopting a single currency by 2030, instead outlining a gradual, market-led transition towards greater use of the ZiG. This approach relies on sustained macroeconomic stability and conditions that encourage businesses and consumers to voluntarily use the currency.
The central bank is also working to expand the ZiG's role in domestic transactions, including its use in tax payments and public-sector transactions, alongside measures affecting foreign exchange and national payments systems.
However, wider use in payments does not equate to confidence in a currency as a store of value. People may use ZiG when necessary or when circumstances leave them little choice, but they may not be willing to keep their savings in it.
For Mbwandarikwa, the memory of losing his pension savings remains a significant factor in his decision-making. For Chigumira, the limited number of customers paying in ZiG indicates how far the currency still has to go to become a regular part of business transactions.
Dube believes that de-dollarisation is possible, but it cannot happen overnight. "History shows that it is possible to de-dollarise, though it’s not easy. It takes time," he states.
For Zimbabweans who have experienced repeated currency crises, the key test will be whether the ZiG can maintain their earnings and savings over time. While expanding its use through policy may be feasible, gaining public trust will require sustained stability and confidence in the currency.
"Policy should not try to force a conversion but should create the necessary incentives which will eventually see both businesses and consumers being indifferent to holding ZiG or US dollars," Dube concludes.