Online Reporter
Persistence Gwanyanya
The introduction of higher-denomination Zimbabwe Gold (ZiG) banknotes and reintroduction of ZiG coins by the Reserve Bank of Zimbabwe (RBZ) next week, on April 7, coincides with a period of pronounced macroeconomic stability.
Renewed market confidence, underpinned by demonstrable credibility of the monetary authorities, is expected to support the acceptance of the upgraded ZiG notes for both transactional and store-of-value functions.
The timely issuance of upgraded notes addresses critical concerns regarding the quality and durability of the existing currency series.
This move signals a strong policy commitment to the longevity of the ZiG regime.
Furthermore, the RBZ has executed an effective pre-launch communication strategy, which is instrumental in enhancing public acceptability and reducing information asymmetry. Crucially, market sentiment indicates a willingness to engage with the monetary authorities, notwithstanding historical inflationary trauma.
The authorities have demonstrated the capacity to mitigate volatility and sustain stability through prudent monetary policy.
This is evidenced by inflation data for March, which recorded a marginal increase of 0.6 percentage points to 4,4 percent (YoY), despite inflationary pressures from an increase in fuel prices occasioned by the escalating conflict in the Middle East.
Annual ZiG inflation has declined steadily from a peak of 95,8 percent in July 2025 to 4,1 percent in January 2026.
This represents Zimbabwe’s first single-digit annual inflation rate in nearly 30 years.
Such stability reflects disciplined management of monetary aggregates, with money supply growth maintained below 0,5 percent per month.
This discipline is vital to attenuating fears of fiscal monetisation, which characterised previous currency regimes.
Contrary to market expectations that the RBZ would aggressively expand ZiG cash liquidity to alleviate shortages, the central bank has adopted a stance of gradual liquidity injection. This conservative approach aims to mitigate potential inflationary pressures associated with rapid monetary expansion.
Reflecting this prudence, the issuance of higher denominations (ZiG100 and ZiG200) has been deferred to a date yet to be announced.
This strategy is designed to curb arbitrage opportunities and parallel market premiums that plagued previous currency regimes. Concurrently, the RBZ targets maintaining the currency-in-circulation ratio around 5 percent, up from the current level of approximately 3 percent.
Furthermore, the reintroduction of coinage addresses critical transactional frictions in low-value exchanges.
Coins will facilitate efficiency in micro-transactions, particularly within the transport sector and informal trade, reducing the cost of change shortages.
Regarding the exchange rate regime, the monetary authorities have clarified that the road map to a mono-currency system is now contingent upon specific conditions precedent rather than fixed timelines.
This clarification mitigates the risk of premature discontinuity of the multiple currency system, which could have undermined confidence in the new notes.
The apex bank has intensified awareness campaigns to assure market participants that the multi-currency regime will persist until defined thresholds are met.
The primary condition precedent for the ZiG currency is the accumulation of foreign exchange reserves to guarantee convertibility.
The RBZ has made tangible progress, with gross reserves reaching US$1,2 billion.
This provides approximately 1,5 months of import cover, marking significant advancement towards the targeted adequacy level of three to six months.
These reserves form part of a broader suite of conditions precedent (CPs), designed to ensure that the exclusive use of ZiG is not forced prematurely.
The full framework requires:
Monetary stability: Durable single-digit inflation and stable exchange rate dynamics with minimum overvaluation or undervaluation.
Market efficiency: A foreign exchange management system that eliminates segmentation and ensures ease of access for importers.
Fiscal cohesion: Low and sustainable budget deficits aligned with monetary policy.
Financial infrastructure: An efficient national payments system to facilitate secure local currency transactions.
Critically, the framework envisages ZiG demand driven by fiscal operations.
Government preference to settle suppliers and creditors in ZiG is not merely administrative, but a strategic instrument to anchor currency circulation.
While recent directives mandating exclusive ZiG settlements have attracted attention, they constitute only one component of a broader fiscal reform agenda.
Durable stability depends on equilibrium between ZiG demand and supply.
Recent reforms have prioritised demand-side interventions. Notably, in the fourth quarter of 2024, Treasury legislated a 50:50 split for corporate tax payments, a fiscal instrument designed to stimulate structural demand for the local currency.
Preceding the exclusive payment directive, Treasury introduced a standard pricing list for public procurement.
This supports value-for-money imperatives, while mitigating arbitrage opportunities.
By adhering to standardised pricing, public procurement avoids generating excessive margins that could incentivise parallel market trading.
Consequently, recipients of ZiG payments must rely on the interbank market to remain competitive, thereby reinforcing formal exchange rate mechanisms. However, implementation constraints remain.
An analysis of the national purse underscores the necessity of a phased approach: currently, the ZiG component of the fiscus stands at approximately 30 percent.
With employment costs absorbing 20 percent, only 10 percent remains available for supplier and creditor settlements.
This liquidity constraint demonstrates insufficient ZiG depth to support unrestricted local currency payments without risking fiscal indiscipline.
To sustain stability, Treasury must continue to prioritise measures that structurally support demand for ZiG, ensuring that administrative directives align with underlying liquidity realities.
While geopolitical tensions, specifically the conflict involving Iran, Israel and the United States, pose potential risks to disinflationary traction via supply-side shocks, the domestic monetary economy has demonstrated resilience.
The confluence of reserve adequacy, monetary discipline, ease of doing business reforms and regulatory clarity suggests a high probability of success for the introduction of the upgraded ZiG notes.
Persistence Gwanyanya is an economist and member of RBZ’s Monetary Policy Committee. He is also the founder and CEO of Bullion Group International. For feedback, email [email protected]
