Zimbabwe’s ambitious attempt to stabilize its economy using gold reserves and the Zimbabwean gold-backed currency (ZiG) is facing significant challenges, despite assurances from the Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mushayavanhu, that gold would anchor the nation’s currency and economic stability, Mining Zimbabwe can report.
By Rudairo Mapuranga
In his 2025 Monetary Policy Statement (MPS), Mushayavanhu outlined the central bank’s commitment to using gold to bolster the country’s reserves and support the new currency, but recent events suggest otherwise.
The launch of the ZiG in April 2024 was seen as a bold move to stabilize Zimbabwe’s currency amid the country’s long-standing economic crisis. However, by late September, the RBZ was forced to devalue the ZiG by over 40%, raising concerns about its effectiveness as a stabilizing force. The devaluation, which aimed to reduce the gap between the official and parallel market exchange rates, has instead led to widespread inflation, a drop in consumer purchasing power, and declining corporate profits.
In his MPS, Mushayavanhu highlighted the growth of Zimbabwe’s gold reserves, from 1.5 tonnes in April 2024 to 2.7 tonnes by early 2025, representing a 90% increase in reserves now valued at over US$550 million. According to the governor, this increase was designed to back the newly introduced ZiG, ensuring liquidity and instilling confidence in the currency.
“Since April 2024, our gold reserves have risen significantly, providing a solid buffer to stabilize our currency. This growth guarantees that we now have more than three times the cover for our reserve money,” Mushayavanhu stated.
Despite this, the devaluation of the ZiG in September, followed by five consecutive days of its decline in value against the US dollar, has raised questions about the RBZ’s ability to stabilize the economy through gold alone. The ZiG fell from 25.2836 to the dollar on Friday to 25.2842 by Monday, continuing its downward spiral. The black market rate for the ZiG is now as high as 38:1 against the US dollar, significantly higher than the official market rate of 28:1.
The devaluation has sparked inflationary pressures and eroded the purchasing power of consumers, while businesses are struggling to maintain profitability. The government’s decision to stagger bonus payments to civil servants, combined with the scramble for US dollars during the festive season, has put further pressure on the local currency. While the ZiG was designed to stabilize exchange rates, its failure to do so has prompted concerns from businesses and consumers alike.
Gold, which remains Zimbabwe’s most critical reserve asset, has continued to rise on the international market, with prices hitting record highs. On Friday, spot gold climbed to $2,861.46 per ounce, following a sixth consecutive week of gains. However, despite the positive performance of gold globally, the ZiG has struggled to maintain its value domestically.
In a bid to further accumulate foreign reserves, the RBZ revised its foreign currency retention policy for exporters, reducing the retention threshold from 75% to 70%. Exporters are now required to surrender 30% of their foreign currency earnings, a move that is expected to increase the flow of foreign exchange into the RBZ’s reserves. However, exporters have raised concerns that this will negatively impact their operations, particularly given the volatility of the local currency.
To cushion exporters, the RBZ introduced the US Dollar Denominated Deposit Facility (USDDDF), which allows them to invest the additional surrendered proceeds and withdraw funds in ZiG at the prevailing interbank rate. While this offers flexibility, many exporters remain apprehensive about the long-term stability of the ZiG.
Mushayavanhu expressed optimism that gold production would rise to 40 tonnes by 2025, further strengthening Zimbabwe’s gold reserves and helping the country meet its economic growth targets. The RBZ is targeting a 6% growth rate for the economy in 2025, supported by improvements in agricultural output and increased gold production.
Despite this, the continued volatility of the ZiG and the widening gap between the official and parallel market exchange rates signal that the road to economic stability may be much rockier than initially anticipated. As Zimbabwe’s gold-backed currency continues to face devaluation pressures, questions remain about the efficacy of the RBZ’s strategy in navigating the country through its economic crisis.
