A Zimbabwean business lobby group has reported that the government's plan to transition to a mono-currency system sooner than expected is undermining the Zimbabwe Gold (ZiG) tender, which was introduced in April 2024.
The country, having experienced multiple currency collapses since 2000, initially announced in October 2023 that a basket of foreign currencies, including the US dollar, would be utilized until December 2030. However, President Emmerson Mnangagwa indicated in July 2024 that a strong performance of the ZiG could lead to a return to a mono-currency system by 2026.
The Zimbabwe National Chamber of Commerce (ZNCC) stated that this shift is discouraging households and businesses from holding onto the gold-backed note. Many civil servants, whose incomes are primarily in ZiG, face challenges in affording essentials priced in US dollars, leading them to offload their ZiG earnings on the parallel market.
At launch, the ZiG was pegged at approximately 13.5 per dollar but faced a significant devaluation of 43% in late September. As of December 9, it weakened further to 25.6 against the dollar in the formal market, with even lower rates in the parallel market.
Concerns regarding foreign currency reserves have also emerged, with ZNCC noting that reserves stood at just $540 million as of October 31, insufficient to cover even one month's import bill, raising alarms over the sustainability of the nation’s foreign currency management.