In April 2024, Zimbabwe launched its much-touted new currency, the Zimbabwe Gold (ZiG), amid high expectations of economic recovery and currency stabilisation.
Designed to function as a gold-backed digital currency, the ZiG was intended to solve the country's chronic inflationary problems, wean the economy off its reliance on foreign currencies like the US dollar, and restore confidence in Zimbabwe's monetary system.
Less than six months later, however, the reality is far from the government's optimistic projections.
The ZiG has rapidly depreciated in value, retailers are refusing to accept it, and even government parastatals continue to demand payments in foreign currency.
This stark failure highlights a fundamental issue: when hubris and political self-interest override the long-term economic health of the nation, the results can be disastrous.
The vision behind the ZiG
The ZiG was introduced as a gold-backed digital currency, a novel idea that, on paper, seemed like a step toward economic redemption.
The theory was that by tying the currency to gold reserves, Zimbabwe would offer citizens a stable and valuable alternative to the local Zimbabwean dollar (ZWL), which had become synonymous with inflation and economic turmoil.
The hope was that by leveraging Zimbabwe’s significant gold resources, the new currency would avoid the pitfalls of previous currency regimes and gradually regain the trust of the public.
The move was also framed as part of a broader initiative to reduce the country’s dependence on the US dollar, which had become entrenched in day-to-day transactions.
The ZiG would serve as the bedrock of a new Zimbabwean monetary system, backed by real, tangible assets.
This would encourage local businesses to adopt it, and the public would slowly shift their preference from foreign currencies to the new gold-backed currency.
A flawed implementation
The lofty goals behind the ZiG, however, quickly clashed with the hard realities on the ground.
From its inception, there were major warning signs that the currency was being rolled out too quickly, without addressing the structural issues that had caused Zimbabwe’s economic instability in the first place.
For starters, many businesses and citizens were reluctant to adopt the new currency.
Retailers, in particular, were hesitant to accept ZiG as a medium of exchange, fearing its volatility and rapid depreciation.
Within months, there were reports that retailers were hiding their ZiG swiping machines, preferring to conduct transactions in US dollars.
This reluctance was exacerbated by the government's inability to enforce widespread use of the new currency. When the very pillars of the economy—such as retailers—are unwilling to engage with a currency, it is doomed to fail from the start.
The government’s failure to lead by example only compounded the issue. Rather than enforcing a policy of using the ZiG in government transactions, many state entities, including passport offices, continued to charge fees in foreign currencies, especially the US dollar.
This signalled to the public that even the government did not trust its own currency enough to rely on it for essential services.
The notion that a country’s currency must be backed by trust and faith was clearly lost in the rush to introduce the ZiG.
Hubris among the political elite
The crux of the ZiG’s failure lies in the government’s hubris—the inflated belief that merely introducing a new currency, without addressing underlying economic issues, would magically resolve the country's problems.
This hubris manifested in the fact that while the government encouraged the public to adopt ZiG, top officials, including ministers and high-ranking bureaucrats, continued to conduct their own business in US dollars.
It is no secret that many government officials own fuel stations and other key enterprises, and yet these businesses routinely charge in foreign currency, directly undermining the state’s push for ZiG.
This disconnects between what the government preaches and what it practises shows a fundamental flaw in Zimbabwe's leadership.
By continuing to use foreign currency for their own transactions, these officials are signalling that they have little confidence in the very currency they are asking citizens to trust.
Such hypocrisy erodes public faith and casts doubt on the legitimacy of any government policy regarding the new currency.
What makes this even more egregious is the fact that the economic elite in Zimbabwe has insulated itself from the financial hardships faced by ordinary citizens.
When leaders fail to experience the direct consequences of their policies, they are often detached from the struggles of the people they claim to represent.
As long as they can continue to conduct business in stable foreign currencies, there is little incentive for them to ensure the success of ZiG or address the wider economic instability.
The unresolved economic crisis
At the heart of the ZiG’s failure is Zimbabwe’s unresolved economic crisis. Zimbabwe’s economy has been plagued by hyperinflation, high unemployment, and a decimated industrial base for decades.
Introducing a new currency, no matter how innovative or theoretically sound, cannot fix these structural issues.
Inflationary pressures continue to weigh heavily on the economy, with the prices of essential goods and services constantly rising.
A currency must exist within a stable macroeconomic environment to thrive; without such stability, no amount of gold backing can salvage its value.
Moreover, the reliance on imports and the perpetual shortage of foreign currency means that the demand for stable currencies like the US dollar will always overshadow any local alternative.
When people need foreign currency to buy basic goods like fuel and food, it becomes difficult to promote the use of a local currency that lacks purchasing power.
In this context, ZiG was set up to fail from the beginning.
The government’s mismanagement of the economy has only added to the problem. In order to succeed, the ZiG required a comprehensive economic strategy that addressed inflation, boosted domestic production, and stabilised the currency market. Unfortunately, none of these reforms were undertaken.
Instead, the ZiG was introduced as a quick-fix solution to deep-rooted problems that require far more than just monetary intervention.
What’s next for Zimbabwe?
As the ZiG continues to lose value and confidence, the Zimbabwean government faces a difficult choice.
If it wishes to salvage this currency experiment, it must first address the underlying economic issues that have contributed to its failure.
Inflation must be brought under control, and the government must create an environment in which the local currency—where the ZiG can operate without constant fear of devaluation.
More critically, the government must enforce a consistent policy regarding the use of the ZiG.
This means that all government institutions, including parastatals, must switch to the ZiG for all transactions if they want to inspire confidence in the public.
Top officials should also be held accountable for undermining the currency through their use of foreign exchange for personal business dealings.
However, even with these reforms, the path ahead is far from certain.
The public’s faith in Zimbabwean currency has been severely damaged by years of economic mismanagement, and restoring this trust will take more than a new currency.
The broader economy must be rebuilt, with a focus on increasing domestic productivity, ensuring job creation, and fostering sustainable growth.
In conclusion, the introduction of the ZiG was a classic example of hubris overriding national interest. By rushing to introduce a currency without first addressing the country’s deeper economic woes, the Zimbabwean government set itself up for failure.
If Zimbabwe is to find lasting solutions to its economic problems, its leaders must abandon their short-term fixes and focus on the long-term health of the nation’s economy. Only then can Zimbabwe hope to regain the trust of its people and build a stable financial future.
*Gary Gerald Mtombeni is a journalist based in Harare. He writes here in his own personal capacity. For feedback Email garymtombeni@gmail.com/ call- +263778861608