The Reserve Bank of Zimbabwe (RBZ) claims that gold reserves backing the beleaguered Zimbabwe Gold (ZiG) currency ballooned from 2.5 tonnes last year to 2.67 have been described as an attempt to justify reckless printing of the local currency, economists have said.
Zimbabwe introduced the gold-backed ZiG in April last year to replace the RTGS that had been battered by inflation.
At the time the central bank said it had 1.5 tonnes of gold in its vaults and another one tonne held offshore to back the new currency.
RBZ governor John Mushuyavanhu early this month claimed that the central bank now held 2.67 tonnes of gold valued at US$228 million.
The RBZ also holds other precious minerals such as diamonds, which can be converted to gold.
Innocent Matshe, the RBZ deputy governor, said the total currency reserves were “three times over currency in circulation and totally covers all bank deposits as well.”
The ZiG has struggled to hold its own against major currencies since its introduction and in September last year the RBZ was forced to devalue the currency by a staggering 43% to close the gap between the official and parallel market exchange rates.
At introduction, the ZiG was pegged at ZiG13, 57 to US$1 before it crumbled to ZiG24.4 to US$1 when it was devalued in September 2024.
Since then the local currency has been devalued by another 5, 69% to US$1:ZiG26, 30 on the official market while on the parallel market the rate is ZiG1: US$40
Chenayimoyo Mutambarasere, United Kingdom-based economist, said the RBZ could be overstating the amount of gold in its reserves in order to justify the printing of more local currency to fund growing government expenditure.
The vote appropriations for the current fiscal year are ZiG322, 63 billion against expected revenues of ZiG270, 3 billion.
This year’s votes are 233, 03% higher than the vote appropriations of ZiG96, 87 billion for 2024.
Mutambasere warned that such actions could lead to an oversupply of the ZiG, potentially exacerbating inflation and diminishing the currency’s purchasing power.
“The statement from the RBZ regarding currency reserves raises significant questions, particularly in the context of Zimbabwe’s current economic environment as outlined in the 2025 budget,” she said.
“With the anticipated contraction in key sectors like agriculture and mining, both forecasted to decline by 3,5% and 5,2%, respectively, and with declining export figures, it is difficult to see how such robust reserves can be sustained.”
Mutambasere questioned the source of the growing gold reserves when the RBZ has not been getting any lines of credit.
“Without any new lines of credit, it begs belief where these reserves are coming from.
“This claim appears to be strategically positioned to justify increased printing of local currency,” she said.
“If this occurs, the market will be flooded with a currency that lacks any real store of value, leading to price inflation and further devaluation of the ZiG.
“This, in turn, will adversely impact individuals paid in local currency, whose purchasing power will be eroded further.
“The current state of currency circulation, combined with the performance of the ZiG, suggests a precarious situation rather than stability.
“The 2025 budget provides no evidence to support the sustainability of these claimed reserves, particularly in the absence of a strong export performance or significant inflows of foreign capital.”
Itai Zimunya, an economist, also questioned the credibility of the RBZ claims of growing reserves.
“The RBZ’s report that they have 2,67 tonnes of gold suffers from a lack of moral suasion,” Zimunya said.
“Even if they have reserves, it is difficult for ordinary Zimbabweans because what they need is a functional currency that can transact and store value.
“The ZiG is not such a currency,” he said.
“Secondly, the RBZ and its cousins, like the Insurance Council of Zimbabwe and Depositors Protection Commission, have not compensated for people’s losses since 2008.
“What confidence would mere declarations build in business?”
Zimunya added: “People recall the 2018 declaration that the bond note and the US$ were at par.
“If indeed the RBZ had reserves, it ought to have used its monetary policy by reducing interest rates and allowing more borrowings — both corporate and personal.
“Unless that happens, all else are lies.”
The RBZ says it will keep a tight monetary policy stance this year to support the ZiG.
Mushayavanhu told Bloomberg last week that high interest rates will help the RBZ to contain month-on-month inflation to single digits levels.
He said monthly consumer-price gains had “significantly” slowed to 3.7% in December from 37.2% in October.
“The forthcoming 2025 monetary policy statement will further contextualise and consolidate these positive prospects, and proffer more fine-tuning policies to move the economy from stability to growth,” Mushayavanhu was quoted saying.