• Zimbabwe Gold has appreciated for the first time since May 21, rising from 26.9965 to 26.9543 against the U.S. dollar
• RBZ has discontinued the gold coins initiative as part of efforts to stabilize the ZiG through market-driven approaches
• The discontinuation of the gold coins initiative has alleviated fiscal pressures and refocused the RBZ’s efforts on market-driven mechanisms, supported by improved fiscal discipline

Harare- The Zimbabwe Gold (ZiG) has appreciated for the first time since May 21, rising from 26.9965 to 26.9543 against the U.S. dollar on the formal market today, marking its first gain in June following the discontinuation of the gold coins initiative.

This modest 0.16% increase signals a potential shift in the currency’s trajectory after months of depreciation pressures.

The Reserve Bank of Zimbabwe (RBZ) has phased out the gold coins program, a mechanism from the Zimbabwean dollar era designed to preserve currency value, as part of efforts to stabilize the ZiG through market-driven approaches.

This policy shift aligns with broader fiscal consolidation, aiming to address longstanding economic challenges.

The discontinuation of the gold coins initiative, announced by the RBZ, represents a significant pivot in Zimbabwe’s monetary strategy. Introduced in 2022 to divert demand from the U.S. dollar and bolster the Zimbabwean dollar’s value, the gold coins were marketed as a value-preserving investment, redeemable at par after a vesting period.

However, the scheme proved unsustainable due to the government’s inability to meet financial obligations, as evidenced by failures in the Treasury bill market and growing foreign exchange queues.

The RBZ incurred significant costs, reflected in the gap between redemption values in USD and initial Zimbabwean dollar investments converted at parallel market rates.

This mechanism exacerbated fiscal pressures by deferring costs to new investors, creating a cycle of deferred liabilities.

By ending the program, the RBZ has reduced reliance on such costly interventions, allowing resources to be redirected toward stabilising the ZiG through market-oriented policies.

Today’s appreciation of the ZiG to 26.9543 reflects early outcomes of this strategic shift. The gold coins, while initially seen as an innovative hedge against hyperinflation, created a parallel store of value that competed with the ZiG, undermining its role as the primary medium of exchange.

The scheme’s high costs, coupled with its limited accessibility, primarily to wealthier individuals and institutions further strained the RBZ’s reserves, diverting focus from broader economic reforms.

The broader implications of abandoning the gold coins initiative are tied to Zimbabwe’s pursuit of fiscal consolidation.

The program’s reliance on gold reserves and its deferred cost structure placed significant pressure on the RBZ’s balance sheet, limiting its capacity to address structural issues such as low productivity and foreign currency shortages.

The decision to end the scheme aligns with improved fiscal discipline, a key aspect of consolidation efforts since pre-2013 levels.

The RBZ has reduced its reliance on debt monetisation, a former go-to funding mechanism that fueled inflation creating a more sustainable fiscal environment.

This shift has allowed the RBZ to focus on market-driven stabilisation, fostering cautious optimism about the ZiG’s long-term prospects.

Despite this progress, the ZiG faces significant challenges. Zimbabwe’s economy continues to grapple with high inflation, a reliance on imports, and a dominant informal sector that favours U.S. dollars for transactions (70–85% of the economy).

The discontinuation of the gold coins, while alleviating fiscal strain, does not address these structural issues directly. Sustaining the ZiG’s appreciation will require consistent monetary policy, including measures to boost export capacity and rebuild public trust in the currency.

The RBZ’s commitment to avoiding costly interventions like the gold coins is a step forward, but comprehensive reforms are needed to enhance economic resilience.

Global economic factors also influence the ZiG’s performance. The recent ceasefire between Israel and Iran, which led to a 3.2% decline in gold prices due to eased geopolitical tensions, may have reduced speculative demand for gold-based assets in Zimbabwe.

This development supports the RBZ’s focus on the ZiG by diminishing the allure of gold as a competing store of value, a role previously amplified by the gold coins.

Additionally, global commodity price fluctuations, including a 7.5% rise in oil prices earlier due to geopolitical tensions, impact Zimbabwe’s import-dependent economy, indirectly affecting the ZiG’s stability.

Looking ahead, cautious optimism surrounds the ZiG’s trajectory. The appreciation to 26.9543, while modest, marks a milestone in Zimbabwe’s efforts to stabilize its currency.

The discontinuation of the gold coins initiative has alleviated fiscal pressures and refocused the RBZ’s efforts on market-driven mechanisms, supported by improved fiscal discipline. However, the ZiG’s success will depend on addressing deeper economic challenges, including informal sector dominance and foreign exchange constraints.

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