The International Monetary Fund (IMF) has commended Zimbabwe’s introduction of the gold-backed currency, Zimbabwe Gold (ZiG), as a positive policy step. This marks the IMF’s first substantive comment on ZiG since its launch last month.
“The introduction of ZiG represents an important policy action accompanied by several complementary policy changes — including monetary, exchange rate, and fiscal policy measures,” stated an IMF spokesperson in an emailed response to Bloomberg.
Key Policy Changes and Economic Impact
Launched on April 5, ZiG is Zimbabwe’s sixth attempt in 15 years to establish a stable currency, following previous failures due to hyperinflation and volatile foreign exchange rates. The central bank aims to ensure stability by promising not to print additional ZiG units unless they are backed by gold reserves.
Additionally, the central bank has vowed not to fund government spending through money printing, a practice that undermined previous currencies and led to a widespread shift to the US dollar for transactions. Since ZiG’s introduction, the central bank has significantly lowered its benchmark interest rate from 130% to 20% and now publishes the ZiG/USD exchange rate daily. The government has also taken measures to curb unofficial market trading and mandated the use of the official exchange rate.
On Thursday, ZiG reached its highest value against the US dollar, trading at 13.21 per dollar, a 2.6% increase from its initial rate on April 8.
IMF Engagement and Future Prospects
The IMF plans to send a team to Zimbabwe in late June for a routine economic assessment, which will provide an opportunity to review the performance of the new currency system. “This will be an opportunity to discuss and look at the performance of the new currency arrangement,” the IMF spokesperson added.
Finance Minister Mthuli Ncube expressed hopes for a staff-monitored program in the second half of the year during an interview with Bloomberg last month. Zimbabwe, excluded from international capital markets since 1999 due to debt defaults, is striving to restore its international standing despite concerns in Western countries about its human rights record. While the US has lifted some sanctions on state-owned enterprises, it maintains sanctions on President Emmerson Mnangagwa and other top officials.
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