The Zimbabwe ZiG currency moved sideways this week, even as gold price surged to a record high and the central bank unveiled plans to make it the sole currency in the country.
The USD/ZWG exchange rate was trading at 26.74 on Monday, inside the range it has remained in the past few months. Zimbabwe’s gold-backed currency has done better than most currencies this year.
Zimbabwe ZiG to be sole currency
The ZiG currency wavered after the central bank announced that it was in the process of making major changes. In a statement, the bank said that it plan to make it the sole currency by 2030.
This plan means that it will abandon the use of US dollars for most transactions, a major change that will impact most Zimbabweans since USD transactions account for over 70% of all transactions.
As part of the plan, the bank plans to build reserves of up to three to six months of import cover. It also aims to reduce inflation from over 90% to single digits.
Read more: What’s next for the Zimbabwe ZiG exchange rate in 2025?
The bank also aims to narrow the exchange rate premium between the official and parallel markets being less than 30%. When this plan come into effect, local individuals and companies will be allowed to have accounts denominated in local and foreign currencies.
The main change is that they will need to convert the foreign currency to Zimbabwe ZiG when handling transactions. This approach has been supported by top international organizations such as the IMF and the World Bank.
Still, challenges remain, with the main one being confidence among Zimbabweans, who have seen their savings wiped away in the last five times.
Positive macro tailwinds
The ZiG currency is expected to continue facing some notable tailwinds this year. One of them is that its reserves have continued rising now that the gold price has jumped to a record high.
The surging gold value, together with the resilient mining activity, means that the value of reserves has soared. In July, the bank had $731 million in reserves, much higher than $276 million when it was unveiled in April last year.
Recent data showed that gold mining boomed in the second quarter, with production jumping to 11.6 tons, equivalent to over $1.35 billion.
The rising gold mining and price has coincided with strong tobacco production. Data shows that a record 340 million kilograms of tobacco was sold by mid-July, higher than what was produced in the whole of 2024 when the country suffered a major drought.
Therefore, economists believe that Zimbabwe’s economy will grow by about 6% this year, making it one of the fastest-growing economies in the region.
This growth has incentivized the government to start talking with the international community to start paying its debt following the default in 2000.
Paying off the $21 billion will help the country gain access to international capital. In a recent statement, the World Bank chief advised the country to work with G20 countries instead of working by itself.
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