In Zimbabwe, pursuing a stable currency that maintains its exchange rate and avoids fluctuations over time is an economic standard that citizens aspire to.

Attempts have been made to stabilize the currency since 2009, with the most recent endeavor being the Zimbabwe Gold (ZiG) ‘s introduction on April 5, 2024, by the Reserve Bank of Zimbabwe (RBZ).

While the government calls upon citizens to accept the new currency, a move away from the multi-currency system that has been in place since the Zimbabwean dollar’s collapse due to hyperinflation in 2009, two key issues have emerged. The first concern is accountability regarding previous currency regimes to restore public trust and confidence in the ZiG. Given the failures of Zimbabwe’s past currency systems, which have understandably eroded public trust, citizens deserve to know who is accountable for these previous currency crises before a new currency, like the ZiG, is implemented. The second issue is the potential exclusivity or lack of inclusiveness of the ZiG currency. This is a critical consideration that the government and the central bank must carefully address as they roll out the new currency.

These concerns were raised during the ALZ X-Space event, “Understanding the Zimbabwe Gold: Unpacking, Demystifying and Implications,” where Beloved Chiweshe, the ALZ Deputy Chief of Party for the New Narratives for Accountability in Zimbabwe (NNAZ) project, spoke highlighting that failure to address these issues will impact the performance of the ZiG currency like previous ones.

The presentation by Dr. Nicholas Masiyandima, the Deputy Director at the Reserve Bank of Zimbabwe, shed light on the ZiG currency. He stated that the ZiG, introduced through Statutory Instrument (SI) 60 of 2020, is a strategic move to provide a stable, resource-backed currency and regain public confidence after past currency failures. The new currency is said to be backed by gold reserves and other valuable assets held by the RBZ.

However, development economist Chenayi Mutambasere expressed scepticism, describing the ZiG as a “ticking time bomb” due to its lack of substantive backing beyond government convenience. She argued that the currency would likely track the parallel market exchange rate, similar to previous local currency iterations. Mutambasere’s argument is based on Zimbabwe’s significant negative balance of trade, indicating the country’s heavy reliance on imports and inability to generate sufficient export earnings. With exports stagnating around $614 million since June 2023, the inclusivity of the ZiG currency in meeting the daily livelihood needs of citizens, 64% of whom operate in the informal sector, is questionable.

The limited usage and public trust in the local currency are further highlighted by over 83% of the broad money supply is in foreign currency, while local currency reserves make up only 26% of the total reserves. The governance issues surrounding the ZiG were also discussed during the ALZ X-Space event. Hon. Edwin Mushoriwa, a Member of Parliament for Dzivarasekwa, questioned the lack of government efforts to build sufficient public confidence in the new currency, which has resulted in a heavy-handed approach, such as the arrest of foreign currency traders, that undermines the acceptance of the ZiG. He also raised concerns about the oversight or management in place to address fiscal discipline and introduce complementary fiscal policies to support the monetary policy behind the ZiG.

The historical challenges around currency reforms in Zimbabwe raise doubts about whether simply introducing a new currency will be sufficient to address the underlying economic issues. Factors like fiscal discipline, productivity, and export competitiveness require an accountable approach by the RBZ to explain what happened with the previous currencies and what has been done to address those challenges.The specific policy measures announced, such as interest rate recalibration, reserve requirements, and restrictions on bank charges, indicate an effort to provide support and incentives for the new currency. However, the effectiveness of these measures will depend on the efficiency of governance systems, their implementation, and public and business reception.

As the ALZ Accountapreneur Roselily Ushewokunze emphasizes, the government must be vigilant in monitoring prices, the availability of goods, and overall macroeconomic stability to prevent a repeat of the destabilizing episodes experienced in 2008.

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Bathabile Dlamini is the Media and Communications Officer at Accountability Lab Zimbabwe