Zimbabwe’s gold-backed currency is on the brink of failure due to policy missteps that have marginalised it.

“The ZiG is fast going into extinction,” according to Imara Asset Management Chief Executive Officer John Legat and Chief Investment Officer Shelton Sibanda. They added that its downfall won’t result from the kind of rapid devaluation that sank Zimbabwe’s past attempts at a local currency, but rather from becoming irrelevant.

A liquidity crunch, now in its sixth consecutive month, is believed to be crippling the ZiG.

It is estimated that 80% of transactions in Zimbabwe are being carried out in Dollars, with payments in Rand also making up a portion of transactions, Bloomberg reports.

The ZiG, short for Zimbabwe Gold, is the country’s sixth attempt at establishing a stable currency since 2009. It is backed by gold and foreign currency reserves held by the central bank.

Since its launch over a year ago, authorities have faced challenges in convincing Zimbabweans that the ZiG will succeed, and its value has declined.

Indeed, a member of the Reserve Bank of Zimbabwe’s monetary policy committee, Persistence Gwanyanya, stated that while ZiG liquidity is tight in the parallel market, the currency is easily accessible within the formal banking system.

“It’s not extinction of ZiG, but unwinding of US Dollar positions into the local currency that’s next and will help release credit into the economy,” Gwanyanya said on Tuesday.

Although the central bank has attempted to support the ZiG and curb inflation by raising interest rates, this has led consumers to favour using Dollars, according to the Imara report.

The findings suggest that monetary policy alone won’t resolve Zimbabwe’s issues and that the government must focus on generating more revenue and controlling deficit spending to put the economy back on track.

Authorities in Zimbabwe should consider abandoning the ZiG: “It would be better simply to scrap it and move on,” they went on to say.