Zimbabwe’s Ruling Party Pushes for Gold-Backed ZiG as Sole Currency

AFRICAN BUSINESS AND ECONOMYOctober 28, 2024 at 3:50 PM UTC

TLDR

Zimbabwe's ruling party, Zanu-PF, adopts gold-backed ZiG currency as sole legal tender, aiming to phase out US dollars
Introduced in April, ZiG struggles after devaluation, facing 43% drop and increased dollarization
President Mnangagwa suggests shortening the existing timeline until 2030, IMF warns ZiG alone won't solve economic challenges

Zimbabwe’s ruling party, Zanu-PF, has passed a resolution to adopt the gold-backed ZiG currency as the country’s sole legal tender, aiming to phase out the use of US dollars. Announced at the party’s annual conference, the government was directed to “expedite efforts to de-dollarize the economy” and promote ZiG as the nation’s exclusive currency, though no timeline was provided.

The ZiG, or Zimbabwe Gold, was introduced in April, marking Zimbabwe’s sixth currency attempt in 15 years. While current law supports the use of US dollars until 2030, President Mnangagwa has suggested this timeline may be shortened.

The currency has struggled since its September devaluation, with a 43% drop spurring further dollarization. The IMF recently cautioned that ZiG alone won’t solve Zimbabwe’s economic challenges, citing high inflation and low public confidence.

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Key Takeaways

The move to enforce ZiG as Zimbabwe’s sole currency reflects Zanu-PF’s push for economic control amid rising challenges. Analysts question whether ZiG can anchor Zimbabwe’s economy, with IMF and Oxford Economics citing persistent inflation and eroding confidence in the currency. As Zanu-PF plans “robust measures” to boost ZiG’s value, parallel market rates remain volatile, with ZiG trading between 40 and 50 per dollar—far above the official rate of 28.37. The economic implications of phasing out the US dollar, a stable transaction currency, will heavily test Zimbabwe’s policy and monetary authorities.

Zimbabwe

ZiG

IMF

Currency Crisis

Devaluation

Economy

Foreign Exchange