Published on 28/09/2024
The Reserve Bank of Zimbabwe (RBZ) has devalued the Zimbabwe Gold (ZiG) currency by over 40% against the US dollar, succumbing to weeks of mounting pressure.
On Friday, the mid-rate for the ZiG plummeted to ZWG24.3902 per US dollar a sharp decline from ZWG13.9987 the previous day. This drastic move highlights the ongoing struggles of Zimbabwe’s economy. The central bank hopes this adjustment will stabilize the currency and address inflation concerns.
This dramatic depreciation marks the largest single-day decline since the ZiG was introduced in April as a gold-backed currency, designed to replace the rapidly deteriorating RTGS and Bond Notes. The RBZ had initially assured the public that the currency was supported by 2.5 tonnes of gold and foreign currency reserves. However, the ZiG has struggled with increasing market volatility, raising concerns about its long-term viability.
The 40% plunge underscores the persistent challenges faced by Zimbabwe’s economy, as liquidity issues and high demand for foreign currency continue to exert downward pressure on the local currency. Analysts have expressed concerns about the central bank’s ability to stabilize the financial system, with some suggesting that the ZiG could face further devaluation in the coming weeks.
Market speculation is rife over the potential for more instability, casting doubt on the government’s capacity to manage its exchange rate policy. Businesses and consumers are bracing for further price increases, as the currency’s depreciation is expected to drive inflation even higher.
Economic experts are now closely watching to see if the RBZ will take additional steps to restore confidence in the ZiG or if further volatility is inevitable. As the nation grapples with these financial shocks, the burden continues to fall on Zimbabweans, who are already dealing with the impacts of rising costs for goods and services.
