Zimbabwe is trying to persuade people to use its ZiG currency more widely as it seeks to reduce the economy’s dependence on the US dollar, but years of currency crises have left many citizens unwilling to trust it with their earnings and savings.
The Zimbabwe Gold, introduced in April 2024, is backed by foreign currency and precious metal reserves, including gold, according to the Reserve Bank of Zimbabwe (RBZ). The government hopes the currency can eventually play a greater role in everyday payments and reduce reliance on the dollar.
Yet officials face a problem that reserves alone cannot solve: people must believe the ZiG will retain its value before they choose to hold it, accept it in business or use it for long-term savings.
Memories of currency losses
Zimbabwe abandoned its domestic currency in 2009 after a period of hyperinflation, adopting a multicurrency system dominated by the US dollar. A local currency was brought back in 2018, but repeated instability has made it difficult to rebuild public confidence.
For primary school teacher Charles Mbwandarikwa, those earlier crises continue to shape his financial decisions. He receives about a third of his salary in ZiG and exchanges it quickly instead of keeping it.
Mbwandarikwa says he lost his pension savings during the 2009 crisis. When the local currency returned in 2018, he says the value of his salary fell from the equivalent of 540 US dollars to 40 dollars by the end of that year.
His experience helps explain why official assurances about the ZiG have not necessarily persuaded workers to hold the currency.
The central bank has taken steps to reinforce the currency’s credibility, including the introduction of an upgraded series of ZiG banknotes on April 7, with revised designs and security features.
Annual ZiG inflation stood at 3.7 per cent last month, according to the RBZ. But relatively low inflation has not, by itself, created strong demand for the currency.
Businesses test the ZiG’s appeal
The currency’s prospects also depend on whether customers and businesses are willing to use it in ordinary transactions. Clothing retailer Sesedzai Chigumira says she has made only a handful of sales in ZiG.
That leaves businesses with little incentive to price goods in the local currency if they expect customers to prefer US dollars. Consumers, meanwhile, may be reluctant to keep ZiG if they fear its purchasing power will fall.
Economist Cornelius Dube said demand for the currency remained weak. “ZiG has to be available in a ratio relative to its demand. Demand for ZiG is currently very subdued,” he said.
The RBZ has moved away from an earlier target of adopting a single currency by 2030. Instead, it has outlined a gradual, market-led transition towards wider use of the ZiG, based on sustained economic stability and voluntary participation by businesses and consumers.
The central bank has sought to expand the currency’s role in domestic transactions, including tax and public-sector payments, alongside measures affecting foreign exchange and national payment systems.
However, wider use for payments may not amount to confidence in the ZiG as a store of value. People may use it when required or when they have few alternatives while still choosing the US dollar for savings.
Dube said reducing dollar dependence was possible, but would take time. “History shows that it is possible to de-dollarise, though it’s not easy. It takes time,” he said.
For Zimbabweans who have seen their savings and wages lose value, the decisive test will be whether the ZiG can preserve their earnings over the long term. Dube said policy should not force people to convert, but should create incentives that eventually leave businesses and consumers “indifferent to holding ZiG or US dollars”.
