• Persistent Depreciation and Monetary Challenges:  Depreciated by 3.4% YTD and 49.2% since its inception, reflecting significant vulnerabilities in Zimbabwe’s monetary framework
• Tight Monetary Policy Continues to Buttress ZiG: Plays a crucial role in supporting the ZiG, even as it experiences mild declines
• Comparative Regional Models: Successful examples from countries like South Korea, Vietnam, and South Africa illustrate the importance of a diversified economy, innovation, and export-driven growth

Harare- The Zimbabwe Gold (ZiG) has faced persistent bearish pressure against the US dollar (USD), settling at an exchange rate of 26.7069 as of March 21, 2025, marginally weaker than its 26.7116 close on January 22, 2025 marking a record low for the year.

This slide reflects a year-to-date (YTD) depreciation of 3.4%, with a cumulative depreciation of 49.2% since its inception 11 months ago. The ZiG’s underwhelming performance reflects vulnerabilities in Zimbabwe’s monetary framework, despite aggressive tightening measures.

The Reserve Bank of Zimbabwe (RBZ) has leaned heavily on restrictive monetary policy to shore up the ZiG, hiking benchmark borrowing rates to 35% and elevating Statutory Reserve Requirements (SRRs) to 30% for demand deposits and 15% for savings and fixed deposits across both domestic and foreign currencies.

 These measures have effectively constrained ZiG liquidity, curbing money supply growth but simultaneously stifling economic activity by choking credit availability.

Unlike regional peers such as South Africa, which balances rand stability through export-driven forex inflows, or Kenya, which bolsters the shilling via diaspora remittances and diversified trade, Zimbabwe’s approach lacks a robust fundamentals-driven backstop.

Compounding this, the RBZ’s currency support tactics reveal cracks in execution. Reports indicate the government halted supplier payments in December 2024, a liquidity-preservation gambit that persists into Q1 2025.

Partial disbursements resumed in January, but only in dribbles, aimed at rationing ZiG circulation. This has stalled key infrastructure projects some predating the SADC Summit highlighting the pitfalls of an import-reliant economy over a creation-based one.

A creation economy, rooted in domestic production and value addition (e.g., beneficiating gold or lithium), would organically bolster ZiG demand and forex reserves, reducing dependence on artificial pegs or surrender mandates.

In parallel markets, the ZiG/USD premium has contracted from a high of 50 ZiG/USD in November 2024 to 34 ZiG/USD by March 21, 2025, signalling tighter arbitrage spreads and waning speculative fervor.

This convergence stems from restricted ZiG supply in formal channels, yet a stubborn 27% premium lingers.

For businesses, this premium layered with a 1% IMMT tax, royalties, and a 30% forex surrender requirement erodes margins significantly.

Consider a gold miner like Caledonia or RioZim surrendering $30 million USD at an official rate of 28 ZiG/USD, only to face a parallel market rate of 34 ZiG/USD for inputs. This mismatch translates to a 27% haircut on revenues, effectively forcing firms to operate at a loss.

Industry voices have intensified calls to slash surrender ratios or align them with market-driven rates, arguing that such distortions deter investment and cap growth. A 27% premium isn’t just a rate quirk, it’s a structural tax, siphoning nearly a third of earnings and undermining capital formation.

The ZiG’s slow bleed since January reflects rising money supply without commensurate demand-side catalysts.

Left unchecked, this risks further widening the parallel market gap.

To pivot toward sustainability, the government must ditch quasi-fiscal crutches, subsidies, rate rigging, and turbocharge a creation economy.

Incentivising local industry and exports, rather than leaning on imports and forex surrenders, would anchor ZiG stability and foster long-term resilience. Without this shift, the currency’s slide may deepen, dragging economic prospects with it.

Creation economies can be observed in countries that have successfully leveraged domestic production, innovation, and resource utilisation to drive economic growth and sustain their currencies.

These nations prioritise building industries that add value locally, foster innovation, and balance domestic consumption with export competitiveness.

Case studies

South Korea stands out as a prime example of a creation economy. In the mid-20th century, it was a war-torn, agrarian nation with limited resources, heavily reliant on imports and foreign aid. Through deliberate industrialisation and investment in education, South Korea transformed itself into a global manufacturing powerhouse by the 1980s and 1990s.

Companies like Samsung and Hyundai emerged from government-supported initiatives, turning raw inputs and human capital into high-value electronics, automobiles, and shipbuilding products.

The country shifted from exporting basic goods like textiles to producing cutting-edge technology and cars, driving demand for the Korean won through domestic production and export earnings.

Today, South Korea’s economy thrives on innovation think semiconductors and K-pop cultural exports while its currency stability reflects a strong creation-based foundation rather than dependence on imports.

A more recent example is Vietnam, which has rapidly evolved from an agrarian base into a manufacturing hub over the past two decades. By attracting foreign direct investment and building local capacity, Vietnam has become a key player in electronics, textiles, and footwear production think Samsung phones or Nike shoes.

Unlike an import-based model, Vietnam adds value domestically, assembling components into finished goods for export while growing its industrial workforce. This creation focus has driven consistent GDP growth, increased demand for the Vietnamese dong, and built forex reserves, reducing reliance on pegged rates or external aid. Vietnam’s success lies in turning its labour and strategic location into a productive engine, rather than just consuming foreign goods.

Looking to examples within the Southern African Development Community (SADC), South Africa, a leading SADC economy, provides a strong model with its diversified economy supporting the Rand. Anchored by mining (gold, platinum), manufacturing, and services like finance and tourism, the Rand benefits from export earnings and prudent management by the South African Reserve Bank.

It even serves as a regional currency within the Common Monetary Area (CMA), alongside local currencies in Lesotho, Namibia, and Eswatini. Zimbabwe could adapt this by diversifying beyond its reliance on agriculture and mining perhaps tapping into its lithium reserves for battery production while aspiring to stabilise a currency through regional cooperation, though this would require overcoming its history of hyperinflation.

Botswana offers another compelling example within SADC, with its diamond-driven economy underpinning the stable Pula. Through a partnership with De Beers (Debswana), Botswana channels diamond revenues into infrastructure, education, and health, reducing import dependency and bolstering foreign exchange reserves.

This disciplined approach has made the Pula one of Africa’s steadiest currencies. Zimbabwe, rich in minerals like diamonds and platinum, could follow suit by improving governance over its resources learning from past mismanagement in places like Marange and reinvesting profits into diversification.

A transparent state-private partnership model could help build reserves and support a new or reintroduced currency, provided corruption is addressed.

Beyond SADC, Kenya’s digital economy, powered by M-Pesa, showcases how innovation can support a currency like the Kenyan Shilling. This mobile money platform has transformed financial inclusion, enabling micro-transactions that fuel small-scale trade and entrepreneurship, indirectly strengthening domestic economic activity.

Zimbabwe, already familiar with mobile money through systems like EcoCash, could expand this into a broader digital framework. Encouraging a creation economy of startups and small businesses, possibly backed by a state-supported digital currency tied to local production, could reduce reliance on the US dollar and foster economic resilience.

Mauritius, another SADC member, demonstrates the power of an export-oriented economy in supporting the Mauritian Rupee. By focusing on textiles, sugar processing, tourism, and financial services, Mauritius generates foreign exchange through diversified exports while maintaining a stable political climate to attract investment. Zimbabwe could shift its focus from exporting raw commodities like tobacco and minerals to producing value-added goods think refined metals or packaged agricultural products. Emulating Mauritius would require political stability and investor-friendly reforms, areas where Zimbabwe has historically struggled but could improve with concerted effort.

In practice, Zimbabwe could blend these approaches into a hybrid model: monetising its resources transparently like Botswana, embracing digital innovation like Kenya, and boosting exports like Mauritius, all while pursuing SADC cooperation.

Key steps include tightening control over gold and lithium profits, developing industries like agro-processing or mineral beneficiation, and expanding mobile money into a digital currency framework.

For a country like Zimbabwe, emulating such models could mean processing its gold and lithium into finished products or scaling agro-processing industries, creating a self-sustaining cycle that strengthens the ZiG and reduces external dependency.

The common thread is clear: wealth and currency stability come from what a nation can create, not just what it can borrow or buy.

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