By Patience Gondo
ZIMBABWE ’s drive to stabilize its latest currency through expanding gold reserves is gaining momentum, but the U.S. dollar continues to dominate most transactions across the country.
The Reserve Bank of Zimbabwe has tripled its gold reserves over the past two years after compelling mining companies to pay royalties in bullion rather than cash.
The strategy is designed to strengthen the country’s gold-backed currency, the Zimbabwe Gold (ZiG) in and tame chronic inflation that has repeatedly eroded savings and incomes.
The central bank’s growing bullion stockpile, supported by rising international gold prices and increased domestic output, has helped the ZiG maintain relative stability against the U.S. dollar over the past year a rare achievement in a country where previous currencies rapidly lost value.
But despite that progress, the greenback remains the preferred currency for most Zimbabweans and continues to power daily commerce, particularly in the informal sector where the bulk of economic activity takes place.
Official figures show the ZiG currently accounts for only between 30% and 40% of transactions processed through the national payment system.
The usage is even lower in informal markets, where traders and consumers overwhelmingly demand payment in U.S. dollars to avoid exchange rate risks.
Economic analyst Tinashe Murapata said while the increase in gold reserves was an encouraging development, confidence in the local currency would depend on transparency and consistency from monetary authorities.
“It’s a good start,” Murapata said.
“But we need to continuously have those gold reserves audited by external auditors and they need to continuously keep those gold reserves.”
Analysts say ordinary citizens are yet to feel tangible benefits from the central bank’s reserve accumulation, with many still viewing the U.S. dollar as a safer store of value.
“It’s quite remote at the moment for the general person to really feel the impact of the gold reserves on the market,” said analyst Malone Gwandu.
However, Gwandu said the reserve build-up could eventually help establish a more credible monetary framework.
“The foundation that is being built for the currency is quite important for anchoring the currency and deepening its reach both locally and internationally,” he said.
Zimbabwe expects gold deliveries to rise to a record 60 metric tons this year, a milestone authorities hope will further strengthen reserves and encourage wider adoption of the ZiG in the formal economy.
For now however, the U.S. dollar remains firmly entrenched in everyday trade, highlighting the challenge facing authorities as they attempt to restore confidence in a local currency after decades of monetary turbulence.