Zimbabwe’s newest currency, the ZiG, is at risk, not from hyperinflation, but from diminishing relevance, according to Imara Asset Management, the country’s oldest independent brokerage.
Unlike past currency collapses driven by runaway inflation, the ZiG’s potential failure is being shaped by policy missteps and a severe liquidity crunch in its sixth month, Bloomberg reported.
Launched a year ago, the ZiG is Zimbabwe’s sixth attempt in 15 years to create a stable local currency.
It is backed by 2.5 tons of gold and $100 million in foreign currency reserves held by the central bank.
But despite this support, the currency has yet to win over the Zimbabwean public.
Today, roughly 80% of all transactions in the country are still carried out in U.S. dollars, with some in South African rand.
Last year, President Emmerson Mnangagwa announced that the ZiG would eventually become the country’s sole legal tender by 2030, phasing out the multicurrency system.
However, trust in the ZiG remains low.
Its value has declined steadily, and efforts by the government and central bank to drive adoption have fallen short.
Imara believes that recent monetary policies, particularly interest rate hikes intended to defend the ZiG and curb inflation, are pushing more citizens toward the dollar instead.
Persistence Gwanyanya, a member of the Reserve Bank of Zimbabwe’s monetary policy committee, dismissed Imara’s concerns.
He said the liquidity squeeze is limited to the parallel market and does not reflect issues in the formal banking system.
“It’s not the extinction of ZiG, but the unwinding of US dollar positions into the local currency that’s next and will help release credit into the economy,” Gwanyanya said.
But Imara remains unconvinced.
The firm argues that monetary policy alone is not enough to stabilize the currency or restore public trust.
Executives stressed the need for the government to strengthen revenues and reduce fiscal deficits.
In their stark assessment, they concluded: “It would be better simply to scrap [the ZiG] and move on.”
