ZiG relatively extinct and largely irrelevant

Zimbabwe’s local currency the Zimbabwe Gold (ZiG) has become relatively extinct and largely irrelevant because few people are using it.

According to the latest newsletter from Imara Asset Management (Zimbabwe), Zimbabwe has been experiencing increased dollarisation because of the Reserve Bank of Zimbabwe’s tight monetary policies but more importantly its refusal to extend the government’s overdraft facility.

The ZiG has remained stable for the past 13 months after its value dropped by half in five months.

The newsletter says the ZiG, which was introduced in April 2024 had lost half its value by September 2024 after the central bank bailed out the government to service its debt.

“Ever since then, the RBZ has refused to give access to Government to access its overdraft 

facility. As a result, there has been negligible money creation, and the currency has stayed stable,” Imara says.

“Indeed, there is so little ZWG around that it has become relatively extinct as a transactional currency; few players use it so it has become largely irrelevant. And yet, as far as we can see the economy remains in great shape and ‘stable’.”

Imara says dollarisation is now at 85%. This dollarisation has brought about stability, Imara says, and hopes that Zimbabwe will not rush its proposed de-dollarisation.

Zimbabwe is likely to announce its de-dollarisation plan when it unveils its National Development Strategy 2 next month.

The central bank says its economic fundamentals are sound. The country now has foreign reserves of about $900 million which is more than a month’s import cover.

These reserves stood at less than $300 million when the country introduced the ZiG. This was just a little over a week’s import cover.

A country normally needs at least three months’ import cover.

The internationalMonetary Fund says that Zimbabwe must take measures to increase usage and acceptance of the ZiG as currently its share of the trade is just 17%.

One such measure is to remove the intermediated money transfer tax on electronic transfers as ZiG transactions are mostly electronic.

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