IMF urges Zimbabwe to embrace gold-backed ZiG as sole currency

The International Monetary Fund (IMF) has urged Zimbabwe to fully adopt its gold-backed currency, the ZiG, as the sole legal tender.
This recommendation comes as the IMF considers placing Zimbabwe under a staff-monitored program, a crucial step towards potential financial support and debt restructuring for the economically challenged nation.
IMF Backs ZiG as Sole Currency
The IMF has expressed strong support for the ZiG, introduced in April 2024, to become Zimbabwe’s exclusive national currency.
This endorsement is part of ongoing discussions for a staff-monitored program, which could pave the way for future financial assistance and help address Zimbabwe’s substantial external debt of $21 billion.
Key Takeaways

The IMF advocates for the ZiG to be the sole legal tender in Zimbabwe.
This move is linked to a potential staff-monitored program, crucial for debt restructuring.
The ZiG, backed by 2.5 tons of gold and $100 million in foreign currency reserves, is Zimbabwe’s sixth attempt at a stable local currency since 2009.
Despite its backing, the ZiG faces public trust issues, with approximately 80% of transactions still conducted in U.S. dollars.
The IMF emphasizes the need for a single, converged exchange rate between official and parallel markets.

Challenges and Path Forward
Wojciech Maliszewski, the IMF’s mission chief to Zimbabwe, highlighted the need for measures to boost ZiG usage, including deepening the foreign exchange market to ensure full price discovery.
While stability has been observed in the official market and convergence between parallel and official rates, a complete elimination of the gap is desired.
Despite efforts, the ZiG’s 43% devaluation in September, aimed at closing the exchange rate gap, and its limited convertibility have led many citizens to continue favoring the U.S. dollar.
The IMF is not pushing for further depreciation but rather for policies that promote rate convergence through sound fiscal management.
Zimbabwe’s Finance Minister Mthuli Ncube anticipates the staff-monitored program to be finalized by the end of June.
A successful implementation would enhance Zimbabwe’s credibility with international lenders, especially after a previous program in 2019 was derailed by unbacked money printing.