Zimbabwe pushes wider use of ZiG but public trust remains elusive

Zimbabwe's government is trying to persuade citizens to use the Zimbabwe Gold (ZiG) currency more widely, with the longer-term aim of cutting reliance on the US dollar, but years of currency instability have left many people unwilling to trust it.

The ZiG was introduced in April 2024. The Reserve Bank of Zimbabwe (RBZ) says it is backed by foreign currency and precious metal reserves, including gold. The central bank also points to relatively low inflation: it puts annual ZiG inflation at 3.7 percent in the month before the report.

Zimbabwe abandoned its own currency in 2009 after a period of hyperinflation and adopted a multicurrency system dominated by the US dollar. A domestic currency returned in 2018, but repeated instability since then has made public confidence hard to rebuild.

Wages and savings

For primary school teacher Charles Mbwandarikwa, that history is a warning. He receives about a third of his salary in ZiG and exchanges it quickly rather than holding on to it. He lost his pension savings in the 2009 crisis, and says that when the local currency returned in 2018 the value of his salary fell from the equivalent of $540 to $40 by the end of that year.

Economist Cornelius Dube says demand for the currency remains weak. "ZiG has to be available in a ratio relative to its demand. Demand for ZiG is currently very subdued," he said.

Retailers see the same problem. Clothing retailer Sesedzai Chigumira says she has made only a handful of sales in ZiG, reflecting how much more comfortable customers and businesses remain transacting in US dollars.

A gradual transition

The RBZ has moved away from its earlier target of adopting a single currency by 2030. Instead it outlines a gradual, market-led transition towards greater use of the ZiG, dependent on sustained macroeconomic stability and conditions that encourage businesses and consumers to use it voluntarily.

On April 7, the central bank introduced an upgraded series of ZiG banknotes with revised designs and security features. It has also sought to expand the currency's role in domestic transactions, including tax payments and public-sector transactions, alongside measures affecting the foreign exchange and national payments systems.

Dube says wider use in payments is not the same as confidence in a currency as a store of value. People may use ZiG when required, or when they have little choice, without being willing to keep their savings in it. He argues de-dollarisation is achievable but slow: "History shows that it is possible to de-dollarise, though it's not easy. It takes time."

Policy, he says, should create incentives rather than force conversion, so that businesses and consumers eventually become indifferent to holding ZiG or US dollars. For Zimbabweans who have lived through repeated currency crises, the test will be whether the ZiG can preserve their earnings and savings over time.

Source: Al Jazeera.