Opinion / Columnist
RBZ's façade of progress and stability is short-sighted and unsustainable
4 hrs ago | Views
The fairy tales and false assurances continue unabated.
The announcement by the Reserve Bank of Zimbabwe (RBZ) that foreign currency and gold reserves backing the Zimbabwe Gold (ZiG) currency have now reached US$750 million - equivalent to one month's import cover - was carried in state media with much fanfare.
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The narrative presented was one of steady progress towards economic stability and a mono-currency regime.
Yet, beyond the headline figures and official optimism, serious questions arise as to whether this milestone represents real progress or simply another episode of manufactured hope in Zimbabwe's long history of failed currencies and economic mismanagement.
To begin with, one month's import cover is nowhere near sufficient for a country seeking to establish a credible and sustainable currency.
International best practice prescribes three to six months of cover to protect against balance of payment shocks, external debt servicing obligations, and unforeseen economic downturns.
Zimbabwe's US$750 million reserve stockpile may sound impressive in isolation, but in reality, it is only a fraction of what is needed to stabilize a fragile currency.
For context, South Africa - whose economy Zimbabweans often benchmark against - held reserves of more than US$60 billion as of 2024, translating to around six months of import cover.
Botswana, with a population less than a fifth of Zimbabwe's, maintains foreign reserves in excess of US$4 billion, comfortably covering over 10 months of imports.
Zambia, even in the throes of debt restructuring, had over US$3 billion in reserves, far ahead of Zimbabwe.
Comparisons like these highlight a painful truth: Zimbabwe's "milestone" is not really a milestone at all when weighed against regional peers.
If a household barely manages to put aside enough savings to buy groceries for four weeks, while neighbors have savings sufficient for half a year or more, it would be delusional for that household to celebrate as though financial stability had been achieved.
Zimbabwe is in precisely this position.
Moreover, the RBZ's reliance on gold and cash as the foundation of reserves invites further scrutiny.
While 3.5 tonnes of gold may sound significant, its real value is dwarfed by Zimbabwe's import needs.
This year alone, the country will require over US$8 billion to cover its import bill for essentials such as fuel, electricity, medicines, and industrial raw materials.
In other words, the much-trumpeted reserves can only cover around 9 percent of the annual requirement.
It is like a farmer boasting of having secured enough seed to plant one-tenth of his fields while declaring readiness for a bumper harvest.
The mismatch between reserves and actual import demand exposes the fragility of the current situation.
Even more troubling is the absence of proof that these touted reserves actually exist in the first place.
Beyond one or two carefully choreographed visits by the President to gold vaults or reserve facilities, there is zero independent verification.
Where are the independent audits that would help instill confidence that the claims - no matter how woefully inadequate they already are - can at least be taken seriously?
Without audited confirmation, pronouncements about reserves remain just that: words.
A central bank seeking to build public and investor trust must be transparent, subject its figures to scrutiny, and allow independent oversight.
Anything less fuels suspicion that the ZiG rests on smoke and mirrors.
The RBZ also presents reserves as the sole pillar of confidence in ZiG.
Yet, history - both Zimbabwe's and that of other African states - teaches us that currency stability requires much more than a modest stockpile of gold and foreign exchange.
Confidence is built on trust in institutions, policy consistency, fiscal discipline, and, crucially, productive economic activity that generates foreign currency inflows.
Ghana, for instance, entered 2022 with US$9.7 billion in reserves, equivalent to over four months of import cover.
Yet the cedi still collapsed under the weight of unsustainable debt and policy inconsistency, forcing the country to seek an IMF bailout.
This shows that reserves alone, even when far greater than Zimbabwe's, do not guarantee currency stability if the broader macroeconomic fundamentals are weak.
In Zimbabwe's case, those fundamentals remain deeply problematic.
The country continues to suffer from a chronic trade deficit, with imports consistently outstripping exports.
Despite vast mineral wealth, the bulk of export earnings are externalized through opaque mining contracts, smuggling, and illicit financial flows.
The agriculture sector, once the bedrock of foreign currency earnings, is in prolonged decline due to land reform mismanagement, underinvestment, and corruption.
Without tackling these structural weaknesses, the RBZ's reserves accumulation strategy is akin to patching a leaking roof with newspaper - temporary, flimsy, and ultimately ineffective.
Trust in monetary authorities is another critical missing ingredient.
For over two decades, Zimbabweans have been subjected to currency experiments that ended in catastrophe: the collapse of the Zimbabwe dollar in 2008, the bond notes debacle, the RTGS dollar fiasco, and now the imposition of ZiG.
Each time, the RBZ assured the nation that "this time it is different."
Each time, ordinary citizens saw their savings wiped out and their livelihoods devastated.
The scars of hyperinflation, which at its peak reached 79.6 billion percent in November 2008, have not healed.
This historical betrayal means that no matter how many tonnes of gold the RBZ claims to hold, ordinary Zimbabweans remain unconvinced.
Confidence cannot be legislated or imposed; it must be earned through transparency, accountability, and consistent policy.
Contrast this with Botswana, where the pula has remained stable for decades, underpinned not only by substantial reserves but by prudent fiscal management, low debt levels, and transparent governance of diamond revenues.
Similarly, Mauritius has managed to sustain a strong currency through diversification of its economy into manufacturing, tourism, and financial services, reducing vulnerability to commodity shocks.
These examples demonstrate that reserves are only part of the story.
Currency stability ultimately reflects the strength of a country's governance and productive base.
Zimbabwe's attempt to transition to a mono-currency regime within five years, as announced by RBZ Governor John Mushayavanhu, is particularly concerning given this broader context.
The very notion of a mono-currency implies that the Zimbabwean economy must function without widespread reliance on the US dollar.
Yet today, over 80 percent of transactions in the country are still conducted in hard currency, from groceries to school fees to medical bills.
Just today, Air Zimbabwe itself flighted an advert for its domestic routes between Harare and major towns like Mutare and Victoria Falls - and every fare was quoted exclusively in US dollars.
We will not even begin to mention fuel and passports, which continue to be charged exclusively in the greenback.
The parallel market, which continues to thrive, testifies to the lack of faith in ZiG.
More tellingly, this distrust transcends borders.
ZiG is not recognized by international markets, cannot be exchanged for other currencies in foreign lands, and carries no credibility beyond Zimbabwe's borders.
A currency that cannot function outside its own territory is, by definition, not a currency of confidence.
The reliance on compulsory royalties from mining companies, paid partly in gold, as a means of building reserves also raises sustainability concerns.
This model is inherently dependent on global commodity prices and assumes compliance from mining corporations that have historically evaded taxes and royalties through underreporting and smuggling.
Already, estimates suggest that Zimbabwe loses over US$1.5 billion annually in gold smuggling alone.
Unless leakages of this magnitude are plugged, the modest accumulation of reserves will remain a drop in the ocean.
Ultimately, the RBZ's announcement may provide temporary political mileage for the government, projecting a façade of progress and stability.
But for the ordinary Zimbabwean, whose daily life is defined by soaring prices, eroded wages, and dwindling social services, these reserves mean little.
The question is not whether the RBZ has US$750 million in a vault, but whether citizens can buy bread, pay rent, and access healthcare without needing scarce US dollars.
On that front, ZiG has done little to improve lives.
Zimbabwe's path to currency stability will not be secured through press statements and cosmetic reserve accumulation.
It requires rebuilding productive capacity, ensuring transparent governance of mineral revenues, restoring trust in institutions, and fostering a genuine social contract between government and citizens.
Until then, celebrating one month's import cover as a breakthrough is not just premature - it risks repeating the cycle of false dawns that has defined Zimbabwe's tragic economic story.
© Tendai Ruben Mbofana is a social justice advocate and writer. Please feel free to WhatsApp or Call: +263715667700 | +263782283975, or email: mbofana.tendairuben73@gmail.com, or visit website: https://mbofanatendairuben.news.blog/
The announcement by the Reserve Bank of Zimbabwe (RBZ) that foreign currency and gold reserves backing the Zimbabwe Gold (ZiG) currency have now reached US$750 million - equivalent to one month's import cover - was carried in state media with much fanfare.
To directly receive articles from Tendai Ruben Mbofana, please join his WhatsApp Channel on: https://whatsapp.com/channel/0029VaqprWCIyPtRnKpkHe08
The narrative presented was one of steady progress towards economic stability and a mono-currency regime.
Yet, beyond the headline figures and official optimism, serious questions arise as to whether this milestone represents real progress or simply another episode of manufactured hope in Zimbabwe's long history of failed currencies and economic mismanagement.
To begin with, one month's import cover is nowhere near sufficient for a country seeking to establish a credible and sustainable currency.
International best practice prescribes three to six months of cover to protect against balance of payment shocks, external debt servicing obligations, and unforeseen economic downturns.
Zimbabwe's US$750 million reserve stockpile may sound impressive in isolation, but in reality, it is only a fraction of what is needed to stabilize a fragile currency.
For context, South Africa - whose economy Zimbabweans often benchmark against - held reserves of more than US$60 billion as of 2024, translating to around six months of import cover.
Botswana, with a population less than a fifth of Zimbabwe's, maintains foreign reserves in excess of US$4 billion, comfortably covering over 10 months of imports.
Zambia, even in the throes of debt restructuring, had over US$3 billion in reserves, far ahead of Zimbabwe.
Comparisons like these highlight a painful truth: Zimbabwe's "milestone" is not really a milestone at all when weighed against regional peers.
If a household barely manages to put aside enough savings to buy groceries for four weeks, while neighbors have savings sufficient for half a year or more, it would be delusional for that household to celebrate as though financial stability had been achieved.
Zimbabwe is in precisely this position.
Moreover, the RBZ's reliance on gold and cash as the foundation of reserves invites further scrutiny.
While 3.5 tonnes of gold may sound significant, its real value is dwarfed by Zimbabwe's import needs.
This year alone, the country will require over US$8 billion to cover its import bill for essentials such as fuel, electricity, medicines, and industrial raw materials.
In other words, the much-trumpeted reserves can only cover around 9 percent of the annual requirement.
It is like a farmer boasting of having secured enough seed to plant one-tenth of his fields while declaring readiness for a bumper harvest.
The mismatch between reserves and actual import demand exposes the fragility of the current situation.
Even more troubling is the absence of proof that these touted reserves actually exist in the first place.
Beyond one or two carefully choreographed visits by the President to gold vaults or reserve facilities, there is zero independent verification.
Where are the independent audits that would help instill confidence that the claims - no matter how woefully inadequate they already are - can at least be taken seriously?
Without audited confirmation, pronouncements about reserves remain just that: words.
A central bank seeking to build public and investor trust must be transparent, subject its figures to scrutiny, and allow independent oversight.
Anything less fuels suspicion that the ZiG rests on smoke and mirrors.
The RBZ also presents reserves as the sole pillar of confidence in ZiG.
Yet, history - both Zimbabwe's and that of other African states - teaches us that currency stability requires much more than a modest stockpile of gold and foreign exchange.
Confidence is built on trust in institutions, policy consistency, fiscal discipline, and, crucially, productive economic activity that generates foreign currency inflows.
Ghana, for instance, entered 2022 with US$9.7 billion in reserves, equivalent to over four months of import cover.
Yet the cedi still collapsed under the weight of unsustainable debt and policy inconsistency, forcing the country to seek an IMF bailout.
This shows that reserves alone, even when far greater than Zimbabwe's, do not guarantee currency stability if the broader macroeconomic fundamentals are weak.
In Zimbabwe's case, those fundamentals remain deeply problematic.
The country continues to suffer from a chronic trade deficit, with imports consistently outstripping exports.
Despite vast mineral wealth, the bulk of export earnings are externalized through opaque mining contracts, smuggling, and illicit financial flows.
The agriculture sector, once the bedrock of foreign currency earnings, is in prolonged decline due to land reform mismanagement, underinvestment, and corruption.
Without tackling these structural weaknesses, the RBZ's reserves accumulation strategy is akin to patching a leaking roof with newspaper - temporary, flimsy, and ultimately ineffective.
Trust in monetary authorities is another critical missing ingredient.
For over two decades, Zimbabweans have been subjected to currency experiments that ended in catastrophe: the collapse of the Zimbabwe dollar in 2008, the bond notes debacle, the RTGS dollar fiasco, and now the imposition of ZiG.
Each time, the RBZ assured the nation that "this time it is different."
Each time, ordinary citizens saw their savings wiped out and their livelihoods devastated.
The scars of hyperinflation, which at its peak reached 79.6 billion percent in November 2008, have not healed.
This historical betrayal means that no matter how many tonnes of gold the RBZ claims to hold, ordinary Zimbabweans remain unconvinced.
Confidence cannot be legislated or imposed; it must be earned through transparency, accountability, and consistent policy.
Contrast this with Botswana, where the pula has remained stable for decades, underpinned not only by substantial reserves but by prudent fiscal management, low debt levels, and transparent governance of diamond revenues.
Similarly, Mauritius has managed to sustain a strong currency through diversification of its economy into manufacturing, tourism, and financial services, reducing vulnerability to commodity shocks.
These examples demonstrate that reserves are only part of the story.
Currency stability ultimately reflects the strength of a country's governance and productive base.
Zimbabwe's attempt to transition to a mono-currency regime within five years, as announced by RBZ Governor John Mushayavanhu, is particularly concerning given this broader context.
The very notion of a mono-currency implies that the Zimbabwean economy must function without widespread reliance on the US dollar.
Yet today, over 80 percent of transactions in the country are still conducted in hard currency, from groceries to school fees to medical bills.
Just today, Air Zimbabwe itself flighted an advert for its domestic routes between Harare and major towns like Mutare and Victoria Falls - and every fare was quoted exclusively in US dollars.
We will not even begin to mention fuel and passports, which continue to be charged exclusively in the greenback.
The parallel market, which continues to thrive, testifies to the lack of faith in ZiG.
More tellingly, this distrust transcends borders.
ZiG is not recognized by international markets, cannot be exchanged for other currencies in foreign lands, and carries no credibility beyond Zimbabwe's borders.
A currency that cannot function outside its own territory is, by definition, not a currency of confidence.
The reliance on compulsory royalties from mining companies, paid partly in gold, as a means of building reserves also raises sustainability concerns.
This model is inherently dependent on global commodity prices and assumes compliance from mining corporations that have historically evaded taxes and royalties through underreporting and smuggling.
Already, estimates suggest that Zimbabwe loses over US$1.5 billion annually in gold smuggling alone.
Unless leakages of this magnitude are plugged, the modest accumulation of reserves will remain a drop in the ocean.
Ultimately, the RBZ's announcement may provide temporary political mileage for the government, projecting a façade of progress and stability.
But for the ordinary Zimbabwean, whose daily life is defined by soaring prices, eroded wages, and dwindling social services, these reserves mean little.
The question is not whether the RBZ has US$750 million in a vault, but whether citizens can buy bread, pay rent, and access healthcare without needing scarce US dollars.
On that front, ZiG has done little to improve lives.
Zimbabwe's path to currency stability will not be secured through press statements and cosmetic reserve accumulation.
It requires rebuilding productive capacity, ensuring transparent governance of mineral revenues, restoring trust in institutions, and fostering a genuine social contract between government and citizens.
Until then, celebrating one month's import cover as a breakthrough is not just premature - it risks repeating the cycle of false dawns that has defined Zimbabwe's tragic economic story.
© Tendai Ruben Mbofana is a social justice advocate and writer. Please feel free to WhatsApp or Call: +263715667700 | +263782283975, or email: mbofana.tendairuben73@gmail.com, or visit website: https://mbofanatendairuben.news.blog/
Source - Tendai Ruben Mbofana
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