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Zimbabwe says gold-backed currency stable but investor doubts persist
Zimbabwe's gold-backed currency now has more than 100% reserve cover and is stable, according to the central bank, but doubts over its credibility remain, underscored by a persistent premium in the parallel market.
The Reserve Bank of Zimbabwe on Monday kept its benchmark rate unchanged at 35%, citing a stable exchange rate as one of the reasons, and reported total reserves of $701m (R12.63bn). The bank said the portion of transactions carried out using the Zimbabwe Gold (ZiG) currency surged to 43% in May from 26% in April 2024, the month it was introduced.
Decades of economic instability and currency devaluations mean most people still use the US dollar for most purchases. But the authorities are hoping the ZiG's gold backing will give Zimbabweans the confidence to adopt it for everyday transactions.
"ZiG is our national currency, and as the central bank, we are committed to ensuring its success by maintaining all the fundamental characteristics of sound money, including its function as a reliable store of value," Reserve Bank governor John Mushayavanhu wrote in response to Reuters' questions.
"The Reserve Bank has learnt from previous currency failures that maintaining optimum money supply and ensuring monetary stability is vital," he added.
Despite the bank's assurances, the gap between the official exchange rate and parallel market rate remains about 20%.
