ZiG use rises to 43% of transactions

The use of Zimbabwe Gold (ZiG) has risen to 43 percent of transactions, with the Reserve Bank of Zimbabwe (RBZ) expressing confidence that growing adoption of the local currency will eventually translate into long-term capital formation and increased lending by banks.

RBZ Deputy Governor Dr Innocent Matshe disclosed the latest figures while addressing delegates at the Zimbabwe Tripartite Negotiating Forum Global Summit in Victoria Falls.

The ZiG, introduced by the central bank in April 2024, is backed by a combination of foreign currency reserves, precious metals, particularly gold, and other valuable assets.

It replaced the Zimbabwe dollar, which had been undermined by years of hyperinflation and repeated currency instability.

The introduction of the ZiG was accompanied by measures linking money supply growth to reserve backing, with the central bank seeking to strengthen confidence in the local currency.

Since its introduction, the RBZ has conducted nationwide awareness campaigns aimed at encouraging businesses and consumers to use ZiG for everyday transactions.

Matshe said the increase in ZiG usage was encouraging, although greater adoption had yet to translate fully into long-term capital formation.

"I am confident that when you wake up tomorrow, the value of your currency won't have changed. For this, we have done a countrywide campaign and we have seen that the use of ZiG transactions on all platforms has risen to about 43 percent. This is positive, but it's yet to translate to being long-term capital," he said.

Matshe said banks were gradually moving from traditional savings mobilisation towards capital formation, which would enable them to provide medium- and long-term financing to productive sectors.

"We accept that, but these things take time. This will not happen overnight. In terms of why banks are not performing their traditional role in mobilising and then lending, I think, again, the explanation is time," he said.

He pointed to an increase in non-convertible debentures as evidence of the transition taking place within the financial sector.

Matshe also said the loans-to-deposit ratio had declined by between three and five percentage points, but said the movement was not a source of concern for the central bank.

"We have seen non-convertible debentures on the rise because banks are not yet mobilising those and translating them into long-term or medium-term credit. But we think that it's a steady transition of banks and other financial institutions moving from savings to capital formation," he said.

A declining loans-to-deposit ratio generally means banks are lending a smaller proportion of the deposits they hold. If sustained, such a trend can restrict the availability of credit for businesses and other productive activities.

Matshe, however, described the recent movement as normal for an economy undergoing monetary and structural transition.

"Yes, there is an uptick or a downward trend in the loans-to-deposit ratio, but it's between three to four, five downtick. It's expected in a transitional economy like ours. So, I'm not worried. The bank is not yet worried, and we think this will self-equalise and we will see an uptick," he said.

The RBZ expects increased use of the ZiG to strengthen confidence in the currency and eventually encourage greater mobilisation of savings within the formal banking system.

The ability of banks to convert deposits into medium- and long-term credit will be important for financing sectors such as agriculture, mining and manufacturing, where businesses often require patient capital to expand production, invest in equipment and create jobs.

Matshe's comments come as authorities continue efforts to establish the ZiG as a stable local currency and deepen its use across Zimbabwe's financial and economic system.