The Reserve Bank of Zimbabwe (RBZ) has instructed all government suppliers to accept payments exclusively in the country's new currency, ZiG, according to a directive issued this week. The move is designed to strengthen the fledgling Zimbabwe Gold (ZiG) currency and reduce reliance on foreign currencies within the economy.

The directive, communicated to suppliers, mandates that payments for goods and services provided to the state must be settled in ZiG. This policy applies to all government procurement contracts. The RBZ's action follows the introduction of ZiG in April 2024 as Zimbabwe's sixth attempt to establish a stable local currency, replacing the Zimbabwean dollar which had suffered from high inflation and volatility.

The central bank's push for ZiG-only payments represents a direct intervention to increase the currency's usage and acceptance in formal transactions. By anchoring government spending—a significant component of economic activity—to ZiG, the authorities aim to create a foundational demand for the currency. This strategy is seen as a critical step in building confidence in ZiG, which is backed by a basket of foreign currencies and gold reserves.

Zimbabwe's economy has long been characterized by dollarization, with businesses and consumers preferring transactions in US dollars or other foreign currencies to hedge against local currency instability. The RBZ has previously encouraged the use of ZiG through various measures, including setting ZiG-denominated limits on certain digital transaction platforms. This latest directive, however, is a more forceful compulsion applied to a key segment of the market.

We are determined to ensure that our currency is used for all domestic transactions,

an RBZ official stated, underscoring the bank's objective. The policy is expected to impact a wide range of suppliers, from large contractors to small-scale service providers.

The success of the directive will depend on suppliers' willingness to hold and transact in ZiG, which in turn hinges on the currency's perceived stability and value retention. Since its launch, ZiG has faced the challenge of gaining public trust, a hurdle all previous Zimbabwean currency iterations failed to overcome. The RBZ maintains that ZiG's structured backing provides the necessary stability.

Analysts observe that while mandating ZiG payments for government contracts may increase its circulation, broader adoption requires confidence from the general public and the private sector beyond compelled transactions. The policy also raises practical questions about foreign currency needs for suppliers who must import materials or equipment, potentially requiring a managed conversion mechanism.

This development occurs within a wider African context where several nations are grappling with currency management and de-dollarization efforts. The move by the RBZ reflects a common regulatory desire to assert monetary sovereignty and control inflation, though the Zimbabwean case is particularly acute given its history of currency reforms.