Credibility the make-or-break factor in Zimbabwe’s currency endgame: FBC Securities

CLOUDINE MATOLA

Zimbabwe’s push to dismantle the multi-currency system and transition to a single currency regime has reached a defining crossroads, with credibility and public trust emerging as the ultimate deal-breakers, FBC Securities has warned.

The research firm said the success or failure of the currency endgame will hinge on the authorities’ ability to inspire confidence through consistency, transparency, and strict adherence to stated benchmarks.

FBC also said transparency and strict adherence to clearly defined economic benchmarks will determine whether the country’s latest monetary transition succeeds, or spirals into renewed instability.

The warning comes as the Reserve Bank of Zimbabwe (RBZ) signals a decisive shift from a date-driven roadmap to a conditions-based transition out of the current multi-currency framework.

Government has already pledged that the multi-currency regime, dominated by the United States dollar, will remain in place until 2030, offering a medium-term anchor to businesses and households still haunted by past currency collapses.

But in his 2026 Monetary Policy Statement, RBZ Governor Dr John Mushayavanhu reset expectations. He said the move to a mono-currency will not be dictated by the calendar, but by economic fundamentals.

After more than a decade of abrupt policy reversals from dollarisation in 2009, the return of the Zimbabwe dollar in 2019, its suspension in 2022, and the launch of the Zimbabwe Gold (ZiG) in 2024, markets have grown sceptical of deadlines.

A framework anchored on measurable conditions rather than political timelines is designed to rebuild confidence.

Yet confidence cannot be decreed.

In its 2026 Monetary Policy Review, FBC Securities described the conditions-based approach as “a positive signal,” but cautioned that its success will depend entirely on policy discipline.

“The mono-currency transition process must be credible,” the firm said.

“With more than 80% of transactions still conducted in foreign currency, confidence in the local currency framework will hinge on policy consistency, transparency and adherence to stated benchmarks.”

That figure — over 80% of transactions settled in US dollars — lays bare the depth of dollarisation.

Despite the introduction of the ZiG in April 2024, the greenback remains the dominant store of value, pricing refer

“The mono-currency transition process must be credible,” the firm said.

“With more than 80% of transactions still conducted in foreign currency, confidence in the local currency framework will hinge on policy consistency, transparency and adherence to stated benchmarks.”

That statistic,  over 80% of transactions in US dollars, underscores the scale of the challenge. Despite the introduction of the Zimbabwe Gold (ZiG) currency in April 2024, the greenback remains the dominant medium of exchange, store of value and pricing reference point across sectors.

Economists say this duality reflects rational economic behaviour, households and firms hedge against inflation and policy risk by defaulting to the more stable currency.

Reversing that behaviour requires more than regulatory pronouncements. It demands sustained macroeconomic discipline.

At the heart of the transition lies the question of reserve adequacy.

Zimbabwe’s foreign exchange reserves currently stand at approximately US$1.2bn, equivalent to about 1.5 months of import cover.

While authorities argue this provides sufficient backing for the ZiG at present, FBC cautions that the margin remains thin in the face of external shocks.

“Reserve adequacy remains critical,” FBC Securities noted.

“While this provides adequate backing for ZiG at present, stability remains contingent on continued reserve accumulation and sustained foreign currency inflows. Transparency in reserve reporting and disciplined liquidity management will be critical in maintaining credibility.”

In global terms, 1.5 months of import cover is modest. Many emerging and frontier economies target at least three months as a prudential buffer.

For a country seeking to transition toward monetary sovereignty, the optics of reserve strength are as important as the arithmetic.

Markets will be watching not just the headline reserve figure, but the composition, liquidity and reporting frequency.

Clear, regular disclosure could mark a decisive break from past opacity and help anchor expectations.

Zimbabwe’s monetary history has been punctuated by abrupt reversals  including dollarisation in 2009, reintroduction of the Zimbabwe dollar in 2019, suspension of its use in 2022, and the launch of ZiG in 2024. Each shift has eroded confidence and entrenched dollarisation instincts.

The RBZ’s new approach seeks to change that narrative by committing to measurable economic triggers before any full transition.

Analysts say consistency, not innovation, will now be the defining virtue.

A stable interest rate corridor, predictable liquidity management, restrained quasi-fiscal activity and coordination with Treasury on fiscal discipline are seen as prerequisites. Any divergence could quickly undermine the fragile gains made under the ZiG framework.

Beyond reserves and policy signalling lies a deeper structural challenge: informality.

FBC estimates that approximately 76% of Zimbabwe’s economic activity occurs in the informal sector. This has profound implications for monetary transmission and fiscal sustainability.

With such a large portion of commerce taking place outside the formal banking system, the central bank’s ability to influence liquidity conditions is limited. Interest rate adjustments have muted impact when transactions are cash-based and outside regulated channels.

“Structural reform remains imperative,” FBC said.

“With informality estimated at 76% of economic activity, monetary transmission is constrained and the fiscal base remains narrow. Incentives and financial inclusion efforts are essential to deepen intermediation, broaden the tax base and enhance macroeconomic stability.”

Formalisation is not merely a tax question. It is central to currency reform. A mono-currency regime requires deep financial intermediation, digital payment penetration and broad-based participation in the banking system.

Without bringing informal traders into formal channels, through incentives rather than coercion, the domestic currency risks remaining peripheral.

Governor, Dr Mushayavanhu’s emphasis on a conditions-based framework reflects lessons from the past. Date-driven reforms, analysts say, create speculative pressure as markets position ahead of policy shifts.

A conditions-based approach, by contrast, demands patience. It signals that the RBZ will only move when inflation is anchored, reserves are robust, fiscal deficits are contained, and the local currency commands organic demand.

However, the approach also creates a new test: defining and publishing the benchmarks clearly.

Market participants are likely to demand measurable indicators – reserve thresholds, inflation targets, exchange rate stability metrics — against which progress can be assessed.

Absent this clarity, the term ‘conditions-based’ risks being perceived as discretionary.

Zimbabwe’s macroeconomic landscape has stabilised relative to prior episodes of turbulence. Inflation has moderated from historic peaks, and fiscal authorities have signalled greater discipline. Yet vulnerabilities remain: commodity price volatility, climate shocks affecting agriculture, and global financial tightening.

The transition to a mono-currency regime, if mishandled, could reawaken inflationary pressures and reverse stability gains.

Conversely, if managed transparently and patiently, it could restore a measure of monetary sovereignty and reduce transaction costs associated with dual pricing systems.

For now, the government’s 2030 multi-currency horizon provides breathing space. But the credibility clock is ticking.

As FBC Securities makes clear, the success of Zimbabwe’s currency transition will not depend on rhetoric, nor on regulatory force. It will depend on something far more difficult to manufacture, which is trust.

And trust, in monetary economics, is earned slowly, but lost in an instant.