Zimbabwe's central bank governor, John Mushayavanhu, asserts that the country's new currency, the Zimbabwe Gold (ZiG), is significantly undervalued. He claims its true worth could be double its current market price, based on the nation's substantial reserves and gold backing. The ZiG represents Zimbabwe's sixth attempt in 15 years to establish a stable local currency, aiming to combat persistent economic instability and hyperinflation.

Mushayavanhu elaborated on his valuation, stating that if the central bank intended to buy back all local currency in circulation using its reserves, an exchange rate of approximately 15 ZiG to the US dollar would be feasible. Currently, the ZiG trades between 25 and 28 against the US dollar. The currency is robustly backed by 2.5 tons of gold and $100 million in foreign currency reserves, held securely by the central bank.

A critical challenge for the central bank remains the restoration of public confidence, a hurdle underscored by decades of hyperinflation and repeated currency collapses. Mushayavanhu acknowledged this during an interview at the IMF-World Bank Spring Meetings, stating, "It's a function of the confidence of the market in the central bank, and we're still trying to rebuild that confidence. We had lost it and we're trying to rebuild it." This lack of confidence is reflected in the market, where over 90% of daily transactions are still conducted in US dollars, indicating deep-seated dollarization despite efforts to stabilize the local currency.

Economically, Zimbabwe has seen some positive developments. Inflation has remarkably dropped to single digits for the first time in nearly 30 years, though annual inflation slightly increased to 4.4% in March, up from 3.8% in February. This is a significant improvement from levels exceeding 50% when Mushayavanhu assumed his role. The central bank has maintained interest rates at 35% as it monitors potential risks from global shocks, including rising fuel and fertilizer costs exacerbated by geopolitical tensions.

However, the governor also highlighted emerging domestic risks, particularly the prospect of a strong El Niño weather pattern later this year. Such an event could lead to widespread drought, necessitating increased grain imports and placing additional pressure on the nation's foreign exchange reserves. Zimbabwe currently holds approximately $1.4 billion in foreign reserves, including gold, which Mushayavanhu believes is sufficient to cushion against short-term external pressures.

The country's gold production has shown strong performance, rising by 8.3% in the first quarter of the year to 9,312 kilograms. This surge generated $843.3 million in export earnings, a substantial increase compared to $395.9 million in the same period last year.

Looking ahead, Mushayavanhu projects that inflation will remain in single digits throughout the year, even amidst anticipated external shocks. The economy is forecasted to grow by around 5%, a slight downward revision from an earlier estimate of 8%. He also cautioned against any moves to legislate the exclusive use of the ZiG by 2030, emphasizing that such a policy should only be implemented once key economic conditions are adequately met.