Zimbabwe’s central bank has devalued its gold-backed currency, the Zimbabwe Gold (ZiG), by 42 percent in response to mounting pressure from a thriving parallel foreign exchange market.
In a statement on Friday, Reserve Bank of Zimbabwe (RBZ) governor John Mushayavanhu adjusted the official exchange rate for the ZiG from 14.1 per the United States dollar to 24.4 per the American greenback.
While the central bank did not explicitly label the move as a devaluation, Mushayavanhu said move was necessitated by the need for “greater exchange rate flexibility” to address rising inflation and increasing demand for foreign currency in the country.
The ZiG was introduced in early April, replacing the Zimbabwean dollar, which had lost approximately 80 percent of its value since the start of the year.
At the introduction of the new currency, the central bank chief had assured Zimbabweans that enough measures had been put in place to ensure stability of the ZiG, including ensuring there are enough gold available to back the local unit.
The parallel foreign exchange market has persisted, with the ZiG’s value dramatically collapsing in the past few weeks to trade at around 30 to the greenback while the official exchange rate remained pegged at 13.7 to the dollar for most of the month.
This has seen prices of basic commodities sky-rocketing during September.
JN/APA