Zimbabwe’s central bank has spent more than $400 million in just 10 months to support the country’s new gold-backed currency, the ZiG, which was introduced in April 2024. This intervention has been part of efforts to ensure liquidity in the foreign exchange market and stabilize the currency, according to the Reserve Bank of Zimbabwe (RBZ).
Governor John Mushayavanhu revealed on Thursday that the central bank had sold $407.4 million from April to December through its willing-buyer willing-seller system, which replaced the previous weekly dollar auction run by the RBZ. Mushayavanhu made these comments following the monetary policy committee’s decision to maintain the benchmark interest rate at 35%.
Zimbabwean banks have been purchasing about 70% of the available foreign currency under this system, with an additional $35 million sold in January. The RBZ’s continued interventions reflect its strategic efforts to maintain liquidity and meet demand in the face of limited foreign-exchange reserves.
The ZiG, short for Zimbabwe Gold, marks the nation’s sixth attempt since 2009 to establish a stable local currency. Previous efforts were thwarted by surging inflation and significant devaluations. The current currency experienced a 43% devaluation in September 2024 but has since stabilized.
However, analysts at Oxford Economics warn that this recent stability may be artificial, as structural weaknesses in Zimbabwe’s economy could still undermine the currency’s long-term viability. In a client note, the analysts pointed to factors such as limited foreign-exchange reserves, lack of access to external markets, and the government’s reliance on central bank financing to fill fiscal gaps as ongoing concerns that could keep the currency under pressure.
Despite these challenges, the RBZ remains committed to sustaining the ZiG as Zimbabwe’s functioning currency, even as questions persist about its durability and stability.
