World Bank warns Zimbabwe against rushing to make ZiG sole currency

By Godfrey Marawanyika, Bloomberg 

THE World Bank cautioned Zimbabwe against rushing to end the use of dollars in the economy as it could trigger capital flight.

The southern African country has set 2030 as the deadline to phase out the domestic use of dollars and make its bullion-backed ZiG its only currency.

“The government’s goal of transitioning to a mono-currency ZiG system carries a risk of premature de-dollarisation,” the World Bank said in a report Friday. 

Experience, including the nation’s own 2019 re-introduction of the Zimbabwean dollar, “shows that forcing a shift before local currency credibility is established triggers capital flight, widens parallel market premiums, and reverses stabilisation gains,” the Washington-based lender said.

The Zimbabwean dollar was replaced by the ZiG in April 2024 after multiple crashes fanned inflation, reducing its use.

“The pace and sequencing of any transition will be as important as the destination,” the World Bank said.

It also said the country, which has been locked out of international debt markets since 1999 after a default, has an opportunity to restore access and improve external financing conditions as it engages with multilateral creditors on arrears clearance.

France and the UK recently agreed to co-chair a body that will help Zimbabwe restructure the billions of dollars it owes creditors.

“These changes represent a big shift in the macroeconomic environment and an opening for more ambitious reform.”

The World Bank expects the economy to expand 5% this year — the same as the government’s forecast — and slowdown in 2027 due to El Niño, Victor Steenbergen, senior country economist, said in an interview.

Forecasters are predicting the current El Niño cycle will be the strongest on record, threatening to bring severe drought to parts of southern Africa.