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Zimbabwe will launch a new currency on Friday that it said will be backed by the country's gold reserves, in the latest move by President Emmerson Mnangagwa's government to address decades of monetary chaos.
Mnangagwa said after touring the central bank's vaults that the southern African country has enough gold to support the new “structured currency”, although analysts question the adequacy of these assets.
This change comes after the current collapse of the Zimbabwean dollar accelerated this year. Its value fell by three-quarters against the US dollar in 2024, five years after Mnangagwa's ruling ZANU-PF party reinstated a local currency for the first time since hyperinflation in 2008 destroyed the original currency.
The Zimbabwe dollar was trading at about 36,000 Zimbabwe dollars to the US dollar on the black market this week, according to tracking website Zim Price Check, compared with the official rate of 26,000 Zimbabwe dollars.
David Mnangagwa, the president's son who was appointed Zimbabwe's deputy finance minister last year, said the decline was exacerbated by “anxiety and anticipation” ahead of the new currency system.
But analysts and economists said this reflects deeper problems, such as Mnangagwa's government printing money to pay for spending. There is a widespread lack of confidence in the currency on the part of ordinary Zimbabweans who have seen purchasing power and savings vanish due to years of turmoil.
So many Zimbabweans prefer to keep their money at home that the practice has gained an endearing nickname: “mattress banking.”
“We have had five currencies over the last 10 years,” said Masimba Manyanya, a former chief economist at the Ministry of Finance. “It reflects the confusion within the government itself.”
Benson Gandewa, who runs a grocery store in the capital, Harare, said he had not used the local currency in years and had no plans to change that. “My business is still alive because I stick to the US dollar,” he said.
There are also doubts about whether the country has sufficient reserves to support the currency, which is linked to the value of the country's gold. In 2022, the government briefly experimented with minting 1 troy ounce gold coins.
John Mushayavanhu, who was appointed governor of the Reserve Bank of Zimbabwe last month, said the bank had just over a ton of gold in its own vaults and 1.5 tons abroad. The Zimbabwean government is holding an additional $300 million in banks, the Ministry of Finance said. South Africa, its larger neighbour, has about 125 tons of gold in reserve.
Zimbabwe's foreign exchange reserves remain well below those of many African economies, barely covering one month of imports. In Kenya, which recently averted a looming currency crisis, central bank reserves have recovered to more than $7 billion, or the equivalent of 3.7 months of import coverage.
“Zimbabwe has reserves sufficient for less than a month, which is not enough to defend the structured currency,” said economist Tinashe Murabata. “A new coin every five years now seems to be the norm.”
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Zimbabwe cannot rebuild reserves without access to international markets and multilateral support, which has been cut off by decades of arrears to official lenders on a large portion of its external debt. Mnangagwa introduced new initiatives to end financial isolation and pay off debts after taking power from Robert Mugabe in a 2017 coup.
But repeated bouts of repression by his security forces over the years have made the United States and other governments less willing to participate.
The United States this year suspended its participation in the debt dialogue over holding elections in 2023, which are widely seen as rigged in order to re-elect Mnangagwa for a second term.
Mnangagwa this week declared a state of disaster due to a severe regional drought that has destroyed much of this year's crop, and said more than $2 billion was needed to fund the emergency response.
