The World Bank has issued a stern warning to Zimbabwe, advising against a premature and rapid transition away from the multi-currency system, particularly the phasing out of the US dollar. The international financial institution cautioned that rushing to make the bullion-backed ZiG the country’s sole currency by the targeted 2030 deadline could trigger capital flight and reverse recent economic stabilization gains.
In a report released on Friday, the World Bank highlighted that historical experiences, including Zimbabwe’s own re-introduction of its local currency in 2019, demonstrate that forcing a currency shift before the local currency establishes credibility often leads to capital flight, widens parallel market premiums, and undoes stabilization efforts. The World Bank emphasized that the pace and sequencing of any currency transition are as crucial as the destination itself.
Zimbabwe introduced the ZiG in April 2024, replacing the Zimbabwean dollar which had suffered multiple crashes and fueled inflation. The country has been engaging with multilateral creditors to clear arrears, a move that the World Bank sees as an opportunity to restore access to international debt markets and improve external financing conditions. The World Bank projects Zimbabwe’s economy to grow by 5% this year, aligning with the government’s forecast, but anticipates a slowdown in 2027 due to the anticipated strongest El Niño cycle on record.
Key Players Involved
- World Bank: International financial institution that issued the warning and published the Zimbabwe Country Growth and Jobs Report.
- Zimbabwean Government: Aims to phase out the domestic use of US dollars by 2030 and establish the ZiG as the sole currency.
- Reserve Bank of Zimbabwe (RBZ): Introduced the ZiG in April 2024 to stabilize the country’s monetary system.
Event Timeline
- April 2024: The Reserve Bank of Zimbabwe replaced the Zimbabwean dollar with the new gold-backed ZiG currency.
- September 4, 2026: The World Bank released a report cautioning Zimbabwe against a rushed de-dollarisation process.
- 2030: Zimbabwe’s set deadline to phase out the domestic use of dollars and make ZiG its only currency.
