What is ZIG, Zimbabwe’s Gold-Backed Digital Token?

Zimbabwe’s currency history has been marked by numerous changes driven by economic instability. The Reserve Bank of Zimbabwe (RBZ) has played a critical role in introducing various currencies, including the Zimbabwean dollar and its iterations. The latest innovation in Zimbabwe’s currency landscape is the Zimbabwe gold-backed digital token (ZIG), introduced by the RBZ in April 2024.

The ZIG was introduced as a response to ongoing currency instability. According to the RBZ, “ZIG is a digital currency backed by physical gold reserves, designed to provide an alternative store of value for citizens.” This currency was expected to stabilize the economy by offering a more reliable currency option, supported by the physical backing of gold.

Policies supporting the introduction of ZIG

To support the adoption of ZIG, the RBZ and the government introduced key regulatory measures:

1. Mandatory split in tax payments: Businesses were required to pay taxes in an even split between US dollars (USD) and ZIG. This policy was aimed at boosting demand for ZIG by integrating it into formal transactions and enhancing its utility as legal tender.
2. Gold-backed stability assurance: The RBZ guaranteed that ZIG would be backed by physical gold reserves with an annual independent audit to verify the adequacy and security of these reserves. This measure was intended to enhance public confidence and position ZIG as a secure store of value.

Is ZIG money?

To evaluate ZIG against the functions of money, the following considerations are available:

1. Store of value: A stable currency should maintain its purchasing power over time. While ZIG’s gold backing theoretically offers stability, it has faced challenges. Inflation in Zimbabwe remains high, eroding trust in ZIG as a reliable store of value. Despite initial stability, exchange rate fluctuations and inflation have undermined confidence in ZIG’s ability to preserve value. For example, inflation surged from 2.5% in December 2024 to 14.6% in January 2025 (Reuters, 2025), highlighting the currency’s vulnerability.
2. Unit of account: Money should provide a consistent measure for pricing goods and services. ZIG has limited adoption in Zimbabwe’s informal sector, which accounts for about 80% of the economy. Consequently, most prices continue to be quoted in USD, limiting ZIG’s role as a functional unit of account.
3. Medium of exchange: Effective money should facilitate trade. ZIG’s limited acceptance in formal and informal sectors diminishes its utility. The formal sector often discourages its use by imposing higher prices for transactions in ZIG, while the informal sector largely rejects it.

Does it address the most critical characteristic of money—acceptability?

Acceptability is the most critical characteristic of money. For a currency to function effectively, it must be widely accepted by individuals, businesses, and institutions as a legitimate medium of exchange. ZIG faces significant challenges on this front. First, ZIG is largely rejected in Zimbabwe’s informal sector, which accounts for approximately 80% of the economy. Informal traders and small businesses prefer transacting in USD due to greater familiarity and perceived stability. The lack of trust in ZIG, coupled with concerns over its practical utility, has resulted in minimal adoption within this vital economic segment.

Where ZIG is accepted, it is often due to legal mandates rather than market preference. Government regulations have compelled certain formal-sector entities to recognize ZIG for transactions, but this has not translated into voluntary adoption. Businesses frequently impose higher prices for those using ZIG to manage exchange rate risks, further discouraging its use.

Moreover, ZIG lacks acceptance in international markets. It cannot be used to pay for imports or trade with neighboring countries, making it a poor instrument for international commerce. This absence of cross-border utility undermines its potential as a credible currency option for Zimbabwean exporters and importers, who continue to rely heavily on the USD. Without widespread acceptability in both domestic and international markets, ZIG struggles to function as an effective currency. Addressing the underlying issues of trust, stability, and integration with informal and external markets is essential for improving its prospects.

How is it performing against economic metrics?

Inflation: Following the introduction of ZIG in April 2024, inflationary pressures continued to rise. In January 2025, the year-on-year inflation rate surged to 14.6%, up from 2.5% in December 2024 (Reuters, 2025). Month-on-month inflation also increased to 10.5% in January, compared to 3.7% in December. Economists attribute these spikes to factors such as severe droughts affecting food prices, new taxes, and currency instability.

Exchange rate movements: The exchange rate of ZIG has seen significant fluctuations since its introduction. Initially pegged at 13.56 ZIG per USD in April 2024, the currency depreciated rapidly. By September 2024, ZIG had lost nearly 80% of its value on the black market. As of February 2025, the official exchange rate stood at 26.4 ZIG per USD, indicating a depreciation of around 94% since its launch. In the informal market, the rate fluctuated between 35 and 38 ZIG per USD. These fluctuations underscore the volatility and challenges ZIG faces in stabilizing the economy (Reuters, 2024).

Key success factors for ZIG

1. Independent RBZ governance: The RBZ must operate free from political interference to ensure that monetary policies are effective. Political influence often undermines sound economic policies, as seen in the past with excessive money printing and overspending.
2. Restoration of trust: Trust cannot be legislated; it must be earned. For ZIG to succeed, the RBZ needs to restore public confidence through transparency, consistent communication, and effective policy implementation. Public audits of the gold reserves backing ZIG would help increase trust in the system.
3. Integration with the informal sector: Given that 80% of Zimbabwe’s economy is informal, integrating ZIG into this sector is crucial for its success. This can be achieved by simplifying digital payment systems and providing incentives for informal businesses to adopt ZIG in their transactions.

About the authors

Jacob Chizunza is a second-year MBA student at the Samuel Curtis Johnson Graduate School of Management and an Emerging Markets Institute Fellow. He has over eight years of experience in finance, audit, and investment banking, having worked at Deloitte and PwC and as an investment banking associate. His clients have included BlackRock, Blackstone, and Apex. He interned at Evercore in its energy group and serves as the portfolio manager for utilities and telecommunications with the Cayuga Fund in the Parker Center for Investment Research. Passionate about entrepreneurship through acquisition, he is focused on acquiring and scaling small accounting firms. Chizunza is also involved in Mureza, a startup developing electric vehicles for emerging markets.

Nigel Albert Chimhofu is a chartered accountant and entrepreneur specializing in policy analysis and financial education. Chimhofu also writes on Zimbabwe’s economy and develops digital products for accountants.