Zimbabwe Tries to Restore Trust in Its ZiG Currency

Zimbabwe's government is seeking to persuade citizens to use the local currency more widely, with the long-term aim of reducing reliance on the US dollar. But after years of monetary instability, many people remain cautious about the latest effort.

The Zimbabwe Gold (ZiG) currency was introduced in April 2024 as part of the government's push to restore confidence in the local currency. The Reserve Bank of Zimbabwe (RBZ) says the money is backed by foreign exchange reserves and precious metals, including gold.

Yet the challenge is not only about issuing a new currency or bolstering reserves. Zimbabweans who have watched their savings erode and their wages shrink through successive currency crises remain wary of holding a currency whose purchasing power they fear could decline.

Zimbabwe abandoned its local currency in 2009 after a period of hyperinflation and shifted to a multi-currency system anchored by the US dollar. The local currency returned in 2018, but repeated instability has made rebuilding public trust difficult.

Fears Rooted in Past Devaluations

For primary school teacher Charles Mbwandarikwa, memories of earlier currency crises remain a warning. He receives about a third of his salary in ZiG and says he usually exchanges the money immediately rather than keeping it. His caution stems from the losses he suffered when Zimbabwe's previous currency collapsed.

He lost his retirement savings in the 2009 crisis. When the local currency was reintroduced in 2018, he says, the value of his salary fell from the equivalent of US$540 to US$40 by the end of that year. Such experiences help explain why official assurances about the ZiG have yet to translate into confidence among workers.

The RBZ has tried to shore up the currency's credibility. On April 7, it unveiled a new series of ZiG banknotes with fresh designs and security features. According to the RBZ, annual ZiG inflation stood at 3.7% last month. But relatively low inflation is not enough to guarantee that people will choose to save in the currency or use it in everyday transactions.

Economist Cornelius Dube argues that demand for the ZiG remains weak. "ZiG must be supplied at a rate that corresponds to demand. Demand for ZiG is currently very low," he said.

A Currency Few Customers Use

For businesses, customer acceptance of the currency is a real-world test of whether it can play a bigger role in the economy.

Sesedzai Chigumira, a clothing trader, says she sells only a small number of goods and takes payment in ZiG. Her experience reflects the difficulty of encouraging widespread use of a currency when both buyers and businesses remain more accustomed to transacting in US dollars.

The government's effort to reduce dependence on the greenback also faces a broader challenge: the existence of gold and other mineral resources does not by itself guarantee confidence in a currency. People must believe the money will hold its value and remain useful for buying goods, paying fees and saving for the future.

When businesses expect customers to prefer the US dollar, they may be reluctant 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 fall. That creates a vicious circle that policy measures alone may struggle to break.

Conditions for Winning Trust

The RBZ has dropped its earlier target of adopting a single currency by 2030, instead outlining a gradual, market-oriented transition roadmap aimed at increasing use of the ZiG. The approach depends on sustained macroeconomic stability and conditions that encourage businesses and consumers to use the currency voluntarily.

The central bank also seeks to expand the ZiG's role in domestic transactions, including its use for tax payments and in public-sector transactions, alongside measures affecting the foreign exchange market and the national payments system.

However, wider use in payments does not equal confidence in the currency as a store of value. People may use the ZiG when required or when circumstances leave them no choice, without being willing to keep their savings in it.

For Mbwandarikwa, the memory of losing his retirement savings remains part of his calculation. For Chigumira, the small number of customers paying in ZiG shows the currency still has a long way to go before it becomes a familiar part of doing business.

Economist Dube says reducing reliance on the US dollar is feasible, but cannot be achieved overnight. "History shows it is possible to reduce dependence on the US dollar, though it is not easy. It takes time," he said.

For Zimbabweans who have lived through successive currency crises, the test will be whether the ZiG can preserve their incomes and savings over time. Expanding use through policy may be possible, but persuading people to trust the currency will require lasting stability and confidence in the money.

"Policy should not try to impose conversion but should create the incentives needed so that, eventually, businesses and consumers become largely indifferent between holding ZiG or US dollars," Dube said.