IMF calls Zimbabwe's switch to ZiG an 'important' step

The International Monetary Fund (IMF) has commended Zimbabwe's recent adoption of a new gold-backed currency, known as ZiG, viewing it as a positive development. This marks the IMF's first substantive commentary on ZiG since its introduction last month.

In response to inquiries from Bloomberg, a spokesperson for the IMF, headquartered in Washington, acknowledged the significance of Zimbabwe's policy shift, which includes various complementary measures in monetary, exchange rate, and fiscal policies.

ZiG, an abbreviation for Zimbabwe Gold, was officially introduced on April 5th, marking the nation's sixth endeavor in the past 15 years to establish a viable currency following previous failures due to hyperinflation and currency devaluation.

In an attempt to avoid past pitfalls, the central bank has committed to refraining from printing additional ZiG currency unless adequately backed by reserves. Moreover, it has explicitly stated its intention not to finance government expenditures by printing money, a practice that undermined previous currency attempts and led to the predominance of US dollar transactions in the economy.

Since the launch of ZiG, the central bank has adjusted its benchmark interest rate from 130% to 20%, significantly lower than its previous peak, and now provides daily updates on the ZiG-to-dollar exchange rate on its website. Additionally, the government has implemented measures to curb unofficial trading in ZiG and has warned of penalties for those not adhering to the official exchange rate.

Recent data indicates that ZiG has appreciated against the US dollar, reaching its highest level on Thursday at 13.21 per dollar, representing a 2.6% increase from its initial trading value on April 8th.

The IMF also announced plans to dispatch a team to Zimbabwe for the country's routine economic assessment scheduled for late June. This visit will offer an opportunity to evaluate the performance of the new currency system, according to the IMF spokesperson. Zimbabwe's Finance Minister, Mthuli Ncube, expressed hopes for a staff-monitored program in the latter part of the year during an interview with Bloomberg last month.

Despite Zimbabwe's efforts to regain international credibility and access to capital markets after being excluded since 1999 due to debt default, concerns remain in western capitals regarding the nation's human rights record. While the US has lifted sanctions on certain state-owned enterprises, it has imposed them on President Emmerson Mnangagwa and other senior officials.