Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu has stirred intense public and professional debate with his recent proposal to designate the Zimbabwe Gold (ZiG) currency as the country’s sole legal tender. While the central bank chief insists that the gold-backed currency is now stable enough to function independently, economists and financial experts have denounced the plan as premature, reckless, and potentially disastrous.
Mushayavanhu has been vocal in promoting what critics label “snake oil economics,” claiming that the ZiG has demonstrated sufficient resilience since its April 2024 launch to become Zimbabwe’s exclusive medium of exchange. He argues that phasing out the US dollar by December 2025 will restore Zimbabwe’s monetary sovereignty, allowing the government to regain control of the financial system.
However, this optimism is not shared by many leading economists, who argue that the so-called stability of the ZiG is both artificial and unsustainable. The currency has so far remained relatively steady in part due to restrictions imposed by the government on its use in key sectors. The ZiG cannot be used to pay for fuel, passports, certain taxes, or import duties—undermining its credibility as a truly functional national currency.
Prominent economist Professor Gift Mugano strongly criticized the RBZ’s claims, stating that the currency’s stability is “technically bought” by limiting its circulation. “This so-called stability is fake,” Mugano said. “If the ZiG were genuinely stable, the government would be using it for all mainstream transactions. The current selective application of the ZiG proves that authorities themselves lack confidence in it.”
Mugano warned that unleashing the ZiG as the sole legal tender without robust economic fundamentals could cause it to rapidly depreciate. “The moment you remove the safety barriers and try to make the ZiG do all the heavy lifting in the economy, it will collapse under the weight of mistrust and economic pressure,” he cautioned.
International currency expert Professor Steve Hanke echoed these concerns, highlighting that Zimbabwe’s track record on currency stability is among the worst globally. According to Hanke, the Zimbabwean dollar (including the ZiG) is currently the third worst-performing currency in the world, surpassed only by the Venezuelan bolívar and the Lebanese pound. He reported that the ZiG has depreciated by a staggering 33% year-on-year.
Zimbabwe’s Push to Make ZiG Sole Currency Sparks Fierce Backlash Amid Economic Fears
“Zimbabwe’s money supply (M2) is expanding at an unsustainable rate—122% annually,” Hanke explained. “As night follows day, this explosive growth in the money supply has pushed inflation to 79% per year. President Mnangagwa is delivering a masterclass in economic mismanagement.”
The concern among experts is not merely academic. Zimbabweans have vivid memories of the devastating hyperinflation of 2008–2009, which rendered the Zimbabwean dollar virtually worthless and forced the country to dollarize its economy. Since then, multiple attempts to reintroduce a local currency have failed due to a lack of public trust and structural economic weaknesses.
The ZiG was introduced as a “structured currency” supposedly backed by gold and other reserves to help avoid the pitfalls of previous attempts. But analysts say that backing alone is not enough to support a currency unless it is matched by fiscal discipline, transparent governance, and a productive economic base—factors many believe are still lacking in Zimbabwe.
The Confederation of Zimbabwe Industries (CZI) has also advised caution, urging the government to avoid a rushed de-dollarisation process. It warned that abandoning the US dollar without first stabilizing the macroeconomic environment would harm businesses, hurt export competitiveness, and increase the cost of living for ordinary citizens.
For many Zimbabweans, the announcement has raised alarm rather than hope. “We’ve seen this movie before,” said Harare-based small business owner Tendai Moyo. “They introduce a new currency, say it’s backed by gold, and then everything crashes again. Without real reforms and a serious fight against corruption, no currency will work.”
As 2025 approaches, the RBZ appears committed to pushing forward with the exclusive use of the ZiG. But with mounting evidence of macroeconomic fragility and growing public skepticism, critics warn that enforcing this policy without addressing underlying issues may plunge Zimbabwe into yet another cycle of inflation, hardship, and monetary failure.
Unless bold reforms are implemented and confidence is restored, Zimbabwe’s bid to rely solely on the ZiG could prove not to be a solution, but the start of yet another economic crisis.
Source- Bulawayo24
