Zimbabwe’s Gold-Backed Currency Faces Credibility Test Despite Central Bank Optimism

The Reserve Bank of Zimbabwe (RBZ) claims the currency is supported by more than 100% in reserves, including 2.5 tons of gold and $100 million in foreign assets.

The ZiG, Zimbabwe’s sixth currency attempt in 15 years, was introduced to curb inflation and restore confidence in the local monetary system. Yet many citizens still rely on the U.S. dollar for daily transactions, with past economic turmoil continuing to erode trust.

Although the International Monetary Fund has expressed support for the ZiG and its potential to become a full national currency, uptake remains limited. Government efforts to boost usage have yet to overcome deep-rooted doubts among both consumers and investors.

According to Reuters, the RBZ kept its benchmark interest rate at 35% on Monday, citing exchange rate stability. It also reported total reserves of $701 million and noted that the share of transactions using the ZiG jumped to 43% in May, up from 26% in April when the currency was launched.

Last year, Zimbabwe introduced a new gold-backed currency known as the ZiG, or Zimbabwe Gold, in a bid to curb longstanding currency instability and decades of hyperinflation.

The Zimbabwe Gold (ZiG), has however, continued to face a significant trust gap, as evidenced by persistent premiums in the parallel market, where it trades below the official rate.

This skepticism persists despite the central bank’s assertion that the ZiG is now backed by more than 100% in reserves, comprising gold and foreign currency. The country’s tumultuous monetary history, marked by hyperinflation and abrupt currency shifts, has contributed to this lack of confidence.

While responding to Reuters, Reserve Bank Governor John Mushayavanhu reaffirmed the central bank’s commitment to the ZiG, stating: “ZiG is our national currency, and 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.”

He added, “The Reserve Bank has learned from previous currency failures that maintaining an optimal money supply and ensuring monetary stability is vital.”

Finance Minister Mthuli Ncube remains optimistic, expressing confidence that monetary reforms will pave the way for $2.6 billion in bridge financing by mid-2026.

However, global investors are cautious, with Jetro Siekkinen of LGT Capital Partners stating, “We wouldn’t invest in Zimbabwe at the current stages. The country needs to have a lot more development before we would consider it,” as reported by Reuters.

Analysts have also raised concerns about Zimbabwe’s overall reserve position, noting that the country holds just 0.8 months of import cover, well below the International Monetary Fund’s three-month benchmark.

Other factors include past policy failures, doubts over gold reserve transparency, limited convertibility, and persistent inflation which all fuel skepticism. A strong black-market presence and continued reliance on U.S. dollars further weaken confidence.

Without greater policy credibility and transparency, the ZiG’s future remains uncertain.