Zimbabwe Devalues New Gold-Backed ZiG Currency by 44%
The new exchange rate, effective from Friday, September 27, stands at 24.3 ZiG per US dollar
Zimbabwe Devalues New Gold-Backed ZiG Currency by 44%
Harare, Zimbabwe – In a significant move, the Reserve Bank of Zimbabwe (RBZ) has devalued the gold-backed currency, the Zimbabwe Gold (ZiG), by 44% against the US dollar. The new exchange rate, effective from Friday, September 27, stands at 24.3 ZiG per US dollar, a substantial increase from the previous rate of 14.1 ZiG per dollar announced earlier the same day.
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Despite this official devaluation, the ZiG is trading at a higher rate in the parallel market, with market observers noting rates of at least 28 ZiG to the dollar. This discrepancy highlights ongoing pressures within Zimbabwe's financial sector.
Impact on Consumers and Businesses
The devaluation is expected to have widespread implications for both businesses and consumers. For the average consumer, this change may lead to higher prices for goods and services priced in ZiG. Civil servants, who receive part of their salaries in ZiG, are likely to be particularly affected, as their purchasing power diminishes significantly.
Efforts to Stabilise the Currency
The RBZ's decision follows weeks of rising open market rates and mounting market pressures. In a statement issued to banks and bureau de change, the central bank announced the new exchange rate of 24.3902 ZiG per US dollar. This marks the first official adjustment of the ZiG since its introduction in April this year, when it traded between 13.6 and 14 ZiG per US dollar.
Zimbabwe Devalues New Gold-Backed ZiG Currency by 44%
The central bank's intervention aims to reduce pressure on the domestic currency and stabilise prices. By reducing the liquidity available in the market to chase the limited supply of US dollars, the RBZ hopes to anchor the exchange rate.
Parallel Market Pressures
Despite the intervention, the new official rate remains 23.78% lower than the black market rate, which has surged to around 32 ZiG per dollar. Some traders are demanding even higher premiums based on demand and supply dynamics.
Recent Measures
In a bid to curb further depreciation, the RBZ injected US$64 million into the interbank market in September 2024. Governor Dr John Mushayavanhu confirmed that US$24 million was injected in the first two weeks of September, followed by an additional US$40 million on September 19.
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However, the parallel market continues to exert pressure, with rates far exceeding the official exchange rate. Calls from industry for authorities to further liberalise the exchange rate regime and allow market forces to determine the price are growing louder.
Conclusion
While the move aims to stabilise the currency and prices, the ongoing disparity between official and parallel market rates shows the complexities of the country's financial landscape. Businesses and consumers alike will be closely monitoring the situation as it unfolds.
