Prices of goods and services in Zimbabwe are expected to remain stable due to an increase in cash and mineral reserves backing the new currency, Zimbabwe Gold (ZiG). Over the past three months, these reserves have risen from US$285 million to approximately US$370 million, as reported by The Sunday Mail.
In an interview, Reserve Bank of Zimbabwe (RBZ) Governor Dr. John Mushayavanhu stated that the central bank has ensured ZiG is fully backed at all times. “The Reserve Bank has been accumulating reserves from royalties of gold and conversion of in-kind royalties of other precious minerals such as diamonds, lithium, and platinum to gold reserves,” he explained.
This increase in reserves provides a strong buffer against external forces. ZiG is a structured currency backed by foreign currency and precious metals held by the central bank. Gold deliveries to Fidelity Gold Refinery significantly recovered in the second quarter of the year after the withdrawal of a 15 percent value-added tax on gold deliveries, which had previously affected small-scale miners.
The continued increase in reserves is expected to provide a strong buffer for ZiG, especially against exchange rate volatility, and build the import cover needed for a sustainable currency. Dr. Mushayavanhu emphasized that the RBZ has released adequate liquidity into the market, ensuring cash accessibility through new swipe facilities and kiosks at high-concentration centers.
The new currency, introduced on April 5, has performed exceptionally well. The ZiG exchange rate has remained stable, trading between ZiG13.2 and ZiG13.7 per US$1 over the past three months, resulting in subdued inflation pressures. The IMF also acknowledged Zimbabwe’s success in stabilizing the economy and recommended further refinements to the policy framework.
President Mnangagwa announced a program to gradually de-dollarize the economy following the introduction of ZiG, aiming for full penetration of the new currency in the market. The World Bank has assigned an international currency code to ZiG, represented as ZWG with 924 as the numeric code, replacing the previous ZWL and 932 codes. Dr. Mushayavanhu noted that the new currency notes and coins will continue to be referenced as ZiG.