Zimbabwe’s latest currency, the Zimbabwe Gold (ZiG), is projected to lose nearly half its value by 2025 due to persistent fiscal challenges and economic volatility.
Introduced in April, ZiG marked Zimbabwe’s sixth currency attempt in 15 years. It launched at ZiG13.56 against the US dollar but has already weakened significantly in recent months.
By September 27, monetary authorities devalued the ZiG by 43% to ZiG24.39 per dollar, citing the need for exchange rate flexibility amid surging demand for foreign currency.
The currency’s current value stands at ZiG25.71 per dollar, raising alarm among analysts. Financial research firm Equity Axis predicts the ZiG may lose 47% of its value by year-end.
The firm attributes the currency’s downward trajectory to fiscal indiscipline. Increased liquidity, fueled by government spending ahead of the SADC summit, has amplified exchange rate volatility.
“The rise in money supply without corresponding demand has triggered imbalances,” Equity Axis noted. Projections show an overall decline of up to 52% in 2025, highlighting a turbulent outlook.
Economist Chenayimoyo Mutambasere pointed to deep-rooted structural challenges in Zimbabwe’s economy as the key drivers of the ZiG’s depreciation.
She emphasized that excessive government spending and budget deficits, often funded through money creation, have exerted pressure on the currency’s stability.
“Fiscal and monetary policy disconnect remains evident,” Mutambasere stated. Efforts to stabilize the exchange rate have been undermined by unrestrained spending on subsidies and large-scale procurement.
The economist noted that overambitious revenue targets have further compounded the crisis. Shortfalls in expected revenues have forced the government into more borrowing, exacerbating currency weakness.
“Without reforms to address fiscal indiscipline, the ZiG will remain vulnerable to sharp declines,” she said. Improved coordination between monetary and fiscal authorities is essential to restoring confidence.
Itai Zimunya, another economist, echoed similar concerns. He highlighted unbudgeted expenditures, including infrastructure projects and high-profile procurements, as significant contributors to economic instability.
Spending on SADC villas, road construction, and luxury vehicles has driven up demand for foreign exchange, creating additional pressure on the market, Zimunya explained.
To fill financial gaps, the government has turned to money printing, which has fueled inflation. Rising inflation has accelerated the ZiG’s erosion in value, further dampening economic prospects.
Zimunya also raised concerns about illicit foreign flows and the externalization of funds. Many Zimbabweans opt to bank abroad or fund overseas medical and educational expenses.
“These expenditures drain limited foreign reserves, compounding the pressure on the local currency,” he said. Such trends reflect broader economic inefficiencies and challenges to long-term stability.
The ZiG’s struggles highlight Zimbabwe’s uphill battle to achieve currency stability. Analysts warn that without decisive policy reforms, the local currency will continue to lose value.
Fiscal discipline remains central to the debate. Addressing structural issues, improving expenditure controls, and enhancing revenue strategies are seen as vital steps toward stability.
Economic analysts suggest that coordinated efforts between monetary authorities and the government could prevent further downward spirals and stabilize the ZiG’s trajectory.
However, projections for 2025 paint a bleak picture. Continued fiscal missteps and policy disconnects risk deepening Zimbabwe’s economic headwinds and further eroding confidence in the local currency.
For now, the ZiG’s future hinges on whether fiscal and monetary authorities can align policies to navigate the challenges ahead. Without such alignment, volatility seems inevitable.
Zimbabwe’s currency woes underscore the need for sustainable economic strategies. With looming predictions of sharp depreciation, the ZiG remains at the heart of the country’s fragile economic landscape.