In its first meaningful comment on Zimbabwe's new bullion-backed currency, the International Monetary Fund (IMF) has praised the introduction of Zimbabwe Gold (ZiG) as a pivotal policy development. A representative for the Washington-based lender expressed this sentiment in response to inquiries from Bloomberg, highlighting the importance of ZiG alongside complementary policy adjustments encompassing monetary, exchange rate, and fiscal measures.

ZiG: A Renewed Attempt at Currency Stability

Unveiled on April 5, ZiG marks Zimbabwe's sixth effort in 15 years to establish a stable currency, following previous failures marked by hyperinflation and depreciating foreign exchange values. The central bank's strategy this time hinges on a commitment to only issue ZiG notes backed by reserves, coupled with a firm promise to avoid financing government expenditure through currency printing—an approach that had previously undermined the local currency and necessitated a shift towards transacting in US dollars.

Policy Measures to Support ZiG

Since the launch of ZiG, the central bank has implemented significant policy measures to stabilize and support the new currency. The benchmark interest rate was adjusted to 20% from a staggering 130%—once the highest rate globally. Additionally, the ZiG/dollar exchange rate is now published daily on the central bank's website, enhancing transparency and market confidence.

Enforcement efforts have been strengthened by the central bank's financial intelligence unit and police, targeting unofficial market trade and imposing fines for non-compliance with the official exchange rate. However, Deputy Governor Innocent Matshe clarified that the central bank aims for market forces to determine ZiG's value, stating, “We want the currency to find itself in the market as it should and establish its reputation. It has managed to maintain its value steadily.”

Currency Performance and Future Prospects

On Thursday, the ZiG reached its highest level against the US dollar, trading at 13.21 per dollar—a 2.6% increase from its initial trading value on April 8. This consistent performance underscores the central bank’s strategy to foster market-driven valuation.

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