By Business Reporter-The Zimbabwe Gold (ZiG) currency continues to struggle, despite assurances from the Reserve Bank of Zimbabwe (RBZ) that it is fully backed by reserves.

Introduced in April 2024 to stabilise the economy and replace the inflation-prone Zimbabwe dollar, ZiG has failed to inspire lasting confidence among businesses and ordinary citizens.

Since its launch, the ZiG has battled to gain traction, especially in the informal sector where the US dollar remains dominant.

While the RBZ claims the currency is now backed by reserves amounting to US$683 million, more than double the initial US$276 million, this has not translated into meaningful economic confidence or reduced inflationary pressure.

RBZ Governor Dr John Mushayavanhu insists the reserves, which include US$352 million in gold and US$258 million in cash and nostro balances, offer full cover for both ZiG in circulation and all ZiG-denominated deposits. “The Reserve Bank has achieved various milestones… including narrowing the gap between formal and parallel exchange rates,” he said in a recent interview with the state media.

However, these technical achievements have yet to address the underlying economic problems. The local economy continues to suffer from low productivity, weak investor confidence, and erratic policy direction. Without significant reforms to attract foreign direct investment (FDI), the ZiG remains a currency without strong economic foundations.

Analysts argue that the government’s strategy of enforcing demand for ZiG through tax obligations and the rollout of point-of-sale machines in the informal sector is not enough.

The government’s move to enforce payment of quarterly corporate taxes partly in ZiG has temporarily increased demand, but this artificial support is unlikely to last without deeper economic reforms. Inflation expectations remain high, and parallel market exchange rates continue to influence pricing across sectors.

To boost usage, the RBZ has announced plans to introduce higher denomination ZiG notes—up to ZiG200. But the rollout is slow and faces logistical challenges. Critics warn that printing higher denominations may signal rising inflation and could further undermine confidence.

The collapse of previous Zimbabwean currencies has left a deep scar in public memory. Many remain skeptical of any local unit not backed by real economic growth, institutional credibility, and investor-friendly policies.

Ultimately, ZiG’s sustainability hinges on more than just gold reserves. Until the government adopts sound macroeconomic policies, curbs corruption, respects property rights, and creates a climate conducive to FDI, any currency—no matter how well “backed”—is likely to face collapse.