HARARE — Zimbabwe Gold (ZiG) transactions have risen to about 43% across payment platforms, signalling growing local-currency usage as the Reserve Bank of Zimbabwe (RBZ) seeks to convert improved currency confidence into longer-term domestic capital for bank lending and investment.
RBZ deputy governor Dr Innocent Matshe said the increase was evidence that confidence-building measures were beginning to influence the way businesses and consumers transact, although he cautioned that greater use of ZiG had not yet translated fully into longer-term savings and capital formation.
“We have seen that the use of ZiG transactions on all platforms has risen to about 43 percent. This is positive, but it’s yet to translate to being long-term capital,” Matshe said while addressing delegates at the Zimbabwe Tripartite Negotiating Forum Global Summit in Victoria Falls.
The shift is important for Zimbabwe’s financial system because higher local-currency transaction volumes alone do not guarantee that banks will have sufficient long-term funding to support productive lending.
Matshe said banks were gradually moving from traditional savings mobilisation towards capital formation, a transition he described as gradual rather than immediate.
“We think that it’s a steady transition of banks and other financial institutions moving from savings to capital formation,” he said.
From transactions to productive credit
Market analysts told The Zimbabwe Financial Mail that the next test for the ZiG is whether increased transactional use can develop into a deeper local-currency financial market.
“The 43% figure is important because it shows that ZiG is increasingly being used as a medium of exchange,” one banking analyst said. “But the more important economic question is what happens to those balances after the transaction. If they remain short-term liquidity, the effect on investment is limited. If they become deposits, savings and investable funds, the monetary reform begins to support capital formation.”
Another financial-market analyst said the distinction between currency circulation and financial intermediation was critical.
“A currency becomes economically useful when it does more than facilitate payments. You need deposits, credit, securities and investment products denominated in that currency. That is how transactional confidence eventually becomes financial depth,” the analyst said.
The development comes as Zimbabwe seeks to rebuild the domestic financial system after years of currency instability and extensive use of foreign currency. Greater use of ZiG in formal transactions could provide banks with a larger pool of local-currency liquidity, provided businesses and households are willing to retain part of their balances within the banking system.
Banks face a longer transition
Matshe acknowledged that bank lending has not yet responded proportionately to the increased use of ZiG.
He pointed to an increase in non-convertible debentures and a modest three-to-five percentage-point decline in the loans-to-deposit ratio as evidence of the adjustment taking place within the banking sector.
“We accept that, but these things take time. This will not happen overnight,” he said.
A banking-sector analyst said the development should not necessarily be interpreted as a deterioration in financial intermediation.
“Banks are effectively rebuilding their balance sheets around a currency whose credibility is still being established,” the analyst told The Zimbabwe Financial Mail. “The immediate priority is liquidity and confidence. The next stage is extending the maturity of that funding so that banks can finance working capital, equipment, housing and productive investment.”
Matshe said the RBZ was not concerned by the modest decline in the loans-to-deposit ratio, describing it as normal for an economy undergoing monetary transition.
“It’s expected in a transitional economy like ours. So, I’m not worried. The bank is yet not worried, and we think this will self-equalise and we will see an uptick,” he said.
The capital-formation test
Economists told The Zimbabwe Financial Mail that the real measure of the currency reform will ultimately be whether ZiG can support a functioning domestic savings-and-investment cycle.
“If ZiG balances increasingly stay within the formal financial system, banks gain a more predictable funding base,” an economist said. “That creates the possibility of lending in local currency rather than relying predominantly on foreign-currency funding or short-term instruments.”
The shift would also be significant for Zimbabwean companies seeking financing for expansion. A deeper ZiG financial market could eventually support corporate lending, bonds, money-market instruments and other forms of domestic capital mobilisation.
However, analysts cautioned that increased ZiG usage should not be confused with complete currency substitution.
“The 43% figure should be read as evidence of growing usage, not yet as proof that the economy has fully transitioned to the ZiG,” one analyst said. “The decisive indicator will be whether people are prepared to hold ZiG, save in ZiG and enter longer-term contracts in ZiG.”
For the RBZ, the policy challenge is therefore moving the economy through three stages: transactional use, financial intermediation and capital formation.
Matshe’s comments suggest that the central bank views the first stage as increasingly established, while the banking sector is still working through the second.
The ultimate objective is to turn greater confidence in the currency into a deeper domestic financial system capable of converting Zimbabwean savings into productive investment and longer-term economic growth.
