Faith You Cannot Print

Zimbabwe’s central bank has finally found something real to stand behind its currency. Its citizens are still paying in dollars.

Picture having to carry plastic bags overflowing with trillion-dollar notes to buy basic necessities. This was the very real nightmare Zimbabweans lived in 2008, a testament to the hyperinflationary currency crisis that forced the country to abandon their own legal tender in favour of foreign currencies like the dollar. Such an apocalyptic monetary collapse, where inflation skyrocketed and even bread cost billions of Zimbabwean dollars, epitomizes the devastating consequences of fiscal irresponsibility and the erosion of monetary credibility that continues to haunt Zimbabwe’s economic landscape today.

Since then, Zimbabwe has had eight futile attempts at returning to a currency of its own. Zimbabwe’s hyperinflationary catastrophe stemmed from deeply entrenched structural failures spanning decades that forced the Reserve Bank of Zimbabwe (RBZ) into unconstrained money printing. The unbudgeted Fast Track Land Reform Program, designed to transfer commercial agricultural land to black Zimbabweans, devastated the agricultural sector through chaotic execution that crippled farming productivity and downstream manufacturing. Compounding this, unplanned war veteran payouts consuming 3% of GDP annually drained the budget while inadequate tax collection left government revenues perpetually lacking. International isolation followed as the World Bank and IMF withdrew aid due to the RBZ’s reckless policies and unpaid arrears. With traditional debt financing mechanisms eliminated, investors fled, triggering massive capital flight and exchange rate collapse. The RBZ’s subsequent monetary interventions created perverse incentives that further destabilized the economy. Fiat currencies rely on faith and trust in national institutions, but Zimbabwe cannot print more of that like they did their own currency.

The introduction of the Zimbabwe Gold (ZiG) in April 2024, backed by US$700 million worth of hard assets including foreign currencies, gold, and precious metals, represents Zimbabwe’s most sophisticated attempt to restore monetary sovereignty. The gold-backing mechanism theoretically constrains money supply growth and offers inflation protection through commodity-linked value. Unlike previous fiat experiments, ZiG’s asset backing aims to rebuild credibility by demonstrating the central bank’s ability to maintain convertibility and limit arbitrary money creation. Essentially, ZiG is meant to be sound money backed by real assets to help build back trust within its people.

However, practical adoption remains severely limited. ZiG accounts for only 20% of local transactions and faces acute liquidity constraints, particularly affecting small-denomination transactions under US$1 that dominate Zimbabwe’s extensive informal economy. Six months after launch, inflation surged from 2.5% in December 2024 to 14.6% in January 2025, highlighting the currency’s vulnerability. This limited penetration reflects deeper trust deficiencies and the practical advantages of dollar usage in cross-border trade and value preservation.

The sustainability of ZiG remains highly questionable despite initial optimism. The IMF has cautioned that Zimbabwe won’t solve its economic challenges via the gold-backed ZiG currency, which required devaluation within months of its April launch. Critical vulnerabilities include widespread gold smuggling that undermines reserve accumulation, persistent lack of comprehensive economic reforms addressing fiscal discipline, and fundamental trust deficits stemming from repeated monetary failures. Without addressing the underlying fiscal indiscipline and governance failures that precipitated previous monetary collapses, ZiG risks becoming merely the ninth failed attempt at monetary independence, leaving Zimbabwe perpetually tethered to dollar dependence while citizens remain skeptical of yet another government promise of monetary stability.