Zimbabwe Delays Plan to Phase Out US Dollar, Citing Stability Goals

Zimbabwe is delaying its plan to phase out the US dollar, opting to maintain its dual-currency system until key economic stability targets are met, a senior government official said Wednesday.

Shift in Currency Strategy

Finance Secretary George Guvamatanga announced the policy shift to business leaders at a budget review meeting in Harare. The government will not rush to establish the recently introduced Zimbabwe Gold (ZiG) as the nation's sole legal tender.

"We are not rushing to a single currency until we have a stable exchange rate, stable inflation," Guvamatanga stated. This move postpones the country's initial goal of eliminating the use of the US dollar in daily transactions by 2030.

Economic Preconditions

The decision underscores the government's focus on achieving specific macroeconomic conditions before making a full transition to the ZiG. In addition to a stable exchange rate and controlled inflation, officials aim to bolster the nation's financial buffers.

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Guvamatanga noted that Zimbabwe intends to increase its foreign currency reserves to cover two months of imports, up from the current level of 1.6 months. This target is a critical benchmark for ensuring the new currency's resilience against external shocks.

Context of the ZiG

The bullion-backed ZiG was introduced in April 2024, representing Zimbabwe's sixth attempt in recent history to launch a functional local currency after repeated bouts of hyperinflation. The country has seen some success in taming price pressures, with annual inflation falling to 3.2% last month from 4.7% in June.

This is a significant improvement from the hyperinflationary peak of 786% recorded in May 2020. For investors and businesses, the continuation of the dual-currency system provides a degree of predictability, as the US dollar remains a widely trusted medium of exchange and store of value in the economy.