Zimbabwe gold loans-to-deposit ratio rises

Published: 2 hours ago

Zimbabwe Gold (ZiG) has seen its loans-to-deposit ratio (LDR) climb from 30 percent at its launch in April 2024 to 46 percent, the Reserve Bank of Zimbabwe (RBZ) reported, signalling growing adoption of the country's structured currency.

The ZiG was introduced on April 5, 2024, replacing the inflation-ravaged Zimbabwe dollar and is backed by a composite basket of reserves, including foreign currencies and precious metals, primarily gold. The new currency aimed to reset monetary policy, restore exchange rate stability, and provide a more reliable medium of transaction in Zimbabwe's multi-currency environment.

The LDR measures the percentage of deposits that banks lend out to customers, reflecting their core role of financial intermediation. A rising ratio indicates banks are increasingly converting deposits into loans, supporting economic activity. While higher LDRs can point to profitability, an overly high ratio can trigger liquidity risks. The RBZ considers 70 percent a prudent benchmark, meaning the current 46 percent ratio suggests banks are still maintaining a healthy liquidity buffer.

Banking analysts note that despite strong demand for ZiG-denominated loans, commercial banks face constraints due to lingering liquidity shortages. To alleviate this, the RBZ launched the Targeted Finance Facility, which channels funding directly into productive sectors like agriculture and manufacturing.

Since its debut at 13.56 ZiG per US dollar, the currency has gained traction, with the official exchange rate currently at 26.71 ZiG per US dollar following a 43 percent devaluation in September 2024. Data from the central bank indicates a rising share of domestic transactions are now conducted in ZiG, reflecting growing confidence in the currency.

Foreign currency reserves also strengthened significantly, rising to US$900 million by the end of September 2025 from US$731 million the previous quarter. The RBZ stated that these reserves fully cover both the ZiG's gold backing and the stock of deposited ZiG, reinforcing trust in the currency.

For a country that has experienced multiple currency crises since the 2008 hyperinflation episode, the relative stability of the ZiG is a critical milestone. However, the RBZ has emphasised that the transition to a mono-currency system by 2030 will be gradual. Foreign currency accounts and US dollar contracts will remain protected, ensuring the ZiG continues to operate alongside other currencies until conditions are deemed suitable for full de-dollarisation.

The rising loans-to-deposit ratio, coupled with strengthened reserves and stable exchange rates, highlights the ZiG's emerging role as a stable pillar in Zimbabwe's financial system, providing much-needed confidence to depositors, borrowers, and investors alike.
- the herald

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