THE Reserve Bank of Zimbabwe’s (RBZ, pictured) recent pronouncement regarding the remarkable uptake of the local unit, Zimbabwe Gold (ZiG) currency, which replaced the ZWL in April 2024, presents what appears, on the surface, to be a success story of monetary policy.
According to the central bank, the proportion of transactions conducted in the local currency surged from 26% in April 2025 to 43% by May 2025, a dramatic shift that, if accurate, would signal a watershed moment in Zimbabwe’s long struggle with dollarisation.
However, when these claims are examined against the structural realities of Zimbabwe’s economy, particularly its deep reliance on United States dollar cash transactions and the overwhelming predominance of informal sector activity, serious questions emerge about the veracity and sustainability of this reported shift.
Zimbabwe’s economy has for more than two-years operated on what economists have termed an 80:20 ratio, with approximately 80% of transactions being conducted in US dollars, while the remaining 20% in whatever local currency iteration the government has attempted to implement.
This ratio reflects not mere preference but profound structural realities. The informal sector, which various estimates place at between 70-80% of total economic activity, operates almost exclusively in US dollar cash.
This cash-based informal economy exists precisely because it allows participants to avoid the formal banking system, thereby evading taxation and maintaining liquidity in a currency that has proven reliably stable compared to Zimbabwe’s own volatile monetary experiments.
Against this backdrop, the RBZ’s claim of a 17-percentage point increase in local currency usage within a single month strains credulity, especially at a time when the nation is facing a prolonged contractionary monetary policy.
Such a rapid shift would require either coercive measures forcing economic actors to abandon their established dollar transactions, or a sudden, widespread loss of confidence in the US dollar, neither of which appears to have occurred.
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The RBZ statement provides no explanation for this unprecedented change in monetary behaviour, offering only raw statistics without context about how this transition was achieved amid the tight money supply stance.
This omission is particularly glaring given Zimbabwe’s history of monetary interventions that have often relied more on statutory instruments than organic economic processes.
The timing of these reported shifts in the currency mix and liquidity levels, raises additional questions.
The announcement follows closely on the heels of renewed pressure from the International Monetary Fund (IMF) for Zimbabwe to reduce its dollar dependency and increase the usage of the ZiG across all sectors of the economy, an analogue we dwelled on in the previous edition of The Axis.
The IMF has consistently advocated for de-dollarisation as part of its stabilisation programmes, and Zimbabwe's authorities have equally consistently sought to demonstrate progress on this front, often through measures that create the appearance of local currency usage without necessarily changing underlying economic behaviours.
The remarkable coincidence between IMF recommendations and sudden statistical improvements suggests the possibility that these numbers may reflect compliance with policy directives rather than genuine shifts in economic activity.
Perhaps the most telling indicator of potential problems in the RBZ's narrative comes from examining the cash reserves backing this supposed local currency expansion.
The bank reports total ZiG deposits of approximately ZiG16 billion, with only ZiG207 million, a mere 1%, held as physical cash.
This ratio stands in stark contrast to the 5% minimum liquidity ratio generally considered necessary for developing economies, particularly those with significant cash-based transaction patterns.
In Zimbabwe’s case, where even formal sector businesses often require cash transactions and where the vast informal economy operates entirely outside digital payment systems, a 1% cash reserve is so obviously inadequate as to call into question either the central bank’s understanding of its own economy or the truthfulness of its reporting.
The implications of this cash shortage are severe. If the reported increase in ZiG usage were genuine and widespread, the demand for physical ZiG notes would logically increase proportionally.
Yet the RBZ appears to be maintaining a cash reserve that could not possibly service such demand. This suggests one of two troubling scenarios. Either the reported local currency usage is heavily concentrated in digital transactions among a small subset of formal businesses, meaning the broader economy remains dollarised, or the banking system is artificially suppressing cash withdrawals, forcing businesses and individuals to maintain local currency balances in accounts rather than as usable cash.
Both scenarios would render the RBZ’s optimistic statistics misleading at best. Compounding these concerns is the well-documented behaviour of Zimbabwe’s informal sector, which has consistently demonstrated its ability to circumvent government monetary policies.
Even during periods when authorities have mandated local currency usage, informal traders have either continued dealing exclusively in dollars or engaged in immediate currency conversion on the parallel market.
There is no evidence in the RBZ statement to suggest this deeply entrenched behaviour has changed, meaning any reported shifts in local currency usage and currency mix likely exclude the majority of economic transactions occurring outside formal channels.
When examined holistically, the RBZ's claims appear to describe an economy that exists primarily in policy documents rather than in reality.
The reported statistics may reflect certain formal sector accounting changes or temporary compliance measures rather than genuine monetary transformation.
This pattern is unfortunately familiar in Zimbabwe’s economic history, where previous currency reforms have often begun with optimistic pronouncements that later unravelled when confronted with the realities of hyperinflation, cash shortages, and public mistrust.
For Zimbabwe to achieve sustainable de-dollarisation, as recommended by the IMF earlier this month, it would require not just statistical adjustments but fundamental changes in economic governance, including restoring confidence in monetary institutions, ensuring genuine currency stability, and creating incentives rather than compulsions for local currency usage.
The current approach, as reflected in the RBZ statement, appears to prioritise the appearance of progress over the implementation of policies that might actually alter the structural dollarisation of the economy.
Until these deeper issues are addressed, claims of rapid local currency adoption are likely to prove as ephemeral as previous attempts at monetary reform in Zimbabwe’s troubled economic history.
The danger in this approach is that by masking rather than solving the underlying challenges, authorities risk repeating the cycle of currency crises that has plagued Zimbabwe for decades.
True monetary stability, expected by the international community, which Zimbabwe seeks to engage, will require more than favorable statistics in central bank reports, it will need genuine economic reforms that address the root causes of dollarisation rather than just its symptoms.
Until then, the gap between official pronouncements and economic reality is likely to remain as wide as ever.
- Equity Axis is a financial media firm offering business intelligence, economic and equity research. The article was first published in its latest weekly, The Axis.
