IMF Flags ZiG as Overvalued, Warns Stability Is ‘Artificial’

The IMF warns that Zimbabwe’s ZiG currency is overvalued and sustained by artificial support from the Reserve Bank (image source)

The International Monetary Fund (IMF) has cautioned that Zimbabwe Gold (ZiG), the country’s latest currency reform, remains overvalued and heavily dependent on central bank support, warning that its apparent stability masks deeper structural fragilities in the economy.

According to the IMF’s 2025 Article IV Consultation Report, released this week, the Reserve Bank of Zimbabwe (RBZ) has been propping up the ZiG through heavy foreign-exchange interventions and strict surrender requirements, rather than allowing genuine market forces to determine its value. “A credible monetary and FX policy framework is essential to establish the ZiG as a stable and more widely used national currency,” the IMF report notes.

The IMF highlights that the official willing-buyer, willing-seller rate — trading between US$1: ZiG25 and ZiG28 — has remained artificially aligned compared to the parallel-market rate of US$1: ZiG32–36, thanks largely to RBZ’s daily interventions and the mandatory 30% forex surrender rule imposed on exporters. “The rate does not systematically respond to FX demand when the RBZ is absent,” IMF staff observed. “Agents anticipate periodic interventions at the stabilised rate, which undermines confidence in market-based price formation.”

Despite these measures, Zimbabwe’s gross international reserves stood at only US$683 million by May 2025 — enough to cover less than one month of imports. The Fund assessed the country’s external position as weaker than implied by fundamentals, citing limited export diversification and persistent current-account pressures.

Independent economists mentioned that the ZiG’s limited circulation has hindered its credibility. According to data cited by Bulawayo24, only 27.6% of total broad money supply was held in ZiG balances as of June 2025, with 72.4% still denominated in foreign currencies, mainly the US dollar and South African rand. Economist Dr Gift Mugano said that for the ZiG to gain traction, it must represent at least 15% of total transaction volume across formal and informal markets. “Without liquidity and market confidence, the ZiG will remain a symbolic instrument accepted by regulation, not by trust,” he said.

Retailers, informal traders, and public transport operators continue to price goods in US dollars, often converting ZiG at parallel rates. “If authorities want people to use ZiG, they must first make it usable,” said Rufaro Moyo, a tuck-shop owner in Mbare. “We can’t risk losing value when suppliers demand USD.”

The IMF urged authorities to phase out direct RBZ interventions, instead channelling foreign-currency surrender requirements through authorised dealers to improve transparency. It also recommended gradually moving toward a flexible exchange-rate regime supported by inflation targeting and eliminating remaining exchange restrictions, as well as enhancing central bank independence to restore credibility.

The Fund commended recent efforts to stabilise inflation and strengthen the fiscal balance but warned that continued quasi-fiscal operations, such as market interventions and directed lending, could reverse recent gains.

The ZiG, introduced in April 2024, marked Zimbabwe’s sixth currency reform since the collapse of the Zimbabwe dollar in 2009. It was launched to anchor monetary stability by backing the local unit with gold and foreign-currency reserves, initially pegged at US$1: ZiG13.56.

Early optimism faded as businesses resisted adopting the new unit, preferring hard currencies amid uncertainty over convertibility and pricing. Informal traders, who dominate over 60% of Zimbabwe’s commerce, continue to shun ZiG payments, citing volatility and shortages of small-denomination notes. “The ZiG was introduced with fanfare, but public trust was never earned,” said financial analyst Tapiwa Nyamutora. “Without confidence, even the best-designed currency can fail.”

The Reserve Bank of Zimbabwe is expected to request IMF technical assistance for developing an interbank foreign-exchange trading platform, which would allow banks to freely trade hard currency and improve price discovery. Finance and Economic Development Minister Prof. Mthuli Ncube has also hinted at unveiling a “dollar-exit roadmap” by year-end as part of broader de-dollarisation efforts.

Observers will watch closely whether the government embraces the IMF’s transparency and reform conditions, especially ahead of 2026 borrowing negotiations. For now, the ZiG remains stable by intervention, not by confidence — a fragile equilibrium that analysts warn could unravel if fiscal or political shocks return.