By A Correspondent

HARARE – Zimbabwe’s gold-backed currency, the ZiG, is facing growing scepticism from economists who warn that its recent performance masks deepening liquidity pressures and waning public confidence, despite the Reserve Bank of Zimbabwe’s (RBZ) claims of stability.

The RBZ recently reported that the loans-to-deposit ratio (LDR) for ZiG accounts has surged from 30 percent at launch last year to 46 percent, a development the central bank described as a sign of “healthy financial intermediation.”

However, economists say the trend signals something more troubling.

“This is not necessarily a sign of confidence or growth,” said one Harare-based economist who preferred not to be named. “It reflects that banks are lending more aggressively to sustain liquidity, which can quickly turn dangerous in a fragile economy like ours. The system is under stress.”

The ZiG, introduced on April 5, 2024, replaced the inflation-ravaged Zimbabwe dollar and was marketed as a “structured currency” backed by reserves of gold and foreign currency. It was meant to restore monetary stability and rebuild trust after years of hyperinflation and policy reversals.

But critics argue that the currency’s foundation is weaker than the RBZ admits.

“People are still not fully convinced that the ZiG is truly backed by tangible assets,” said another economist. “If there was genuine confidence, banks wouldn’t be sitting on liquidity shortages, and depositors wouldn’t be rushing to convert their ZiG balances into US dollars the moment they can.”

While the central bank insists that the 46 percent LDR remains well below its “prudential benchmark” of 70 percent, experts warn that the trend is unsustainable given the prevailing liquidity crunch.

“The RBZ is trying to spin a liquidity problem as a sign of confidence,” said a financial analyst. “But the reality is that there’s very little cash circulating in the system. Banks are cautious, depositors are nervous, and the appetite for lending is driven more by survival than growth.”

The liquidity shortage has forced the RBZ to launch the Targeted Finance Facility, a program meant to inject credit into productive sectors such as manufacturing and agriculture. But analysts say the facility has done little to ease systemic pressure.

“The facility is too small and too bureaucratic,” said one analyst. “It’s not addressing the fundamental issue — that confidence in the local currency remains dangerously low.”

Since its debut, the ZiG has lost significant value. Initially pegged at 13.56 ZiG per US dollar, the unit now trades at 26.71, following a sharp 43 percent devaluation in September 2024.

Despite the RBZ’s assertion that foreign reserves have risen to US$900 million, economists question the transparency and sustainability of those figures.

“Even if those reserves exist, they are not enough to guarantee long-term stability,” warned one economist. “The public doesn’t see or feel that backing in daily transactions. Prices are still quoted in US dollars, and the ZiG remains a reluctant currency.”

While the central bank insists the ZiG remains stable and fully backed, many Zimbabweans view it as another temporary fix in a long cycle of failed currency experiments.

“The government is trying to talk up confidence, but on the ground, people are still hoarding US dollars,” said another economist. “Until the economy grows and trust is rebuilt, the ZiG will remain a currency of convenience, not conviction.”

As the RBZ pushes toward its 2030 mono-currency goal, experts say the road ahead will be bumpy.

“The ZiG is walking a tightrope,” one economist concluded. “If liquidity doesn’t improve and confidence doesn’t return, we could easily see another currency collapse — and history tells us how that ends in Zimbabwe.”