Zimbabwe’s central bank allowed its gold-backed currency, the ZiG, to depreciate by over 40% against the U.S. dollar on Friday, alongside raising its policy rate. This move followed weeks of pressure on the currency, which was only introduced in April.
The Reserve Bank of Zimbabwe (RBZ) reported that the new mid-rate for the ZiG stood at 24.3902 to the dollar, compared to Thursday’s 13.9987—a significant 42.6% drop, according to Reuters.
The ZiG, representing Zimbabwe’s sixth attempt at a stable currency within 15 years, was introduced to curb inflation. However, the population remains reluctant to shift from using foreign currencies for transactions.
The RBZ’s Monetary Policy Committee (MPC) convened on Friday, opting for increased exchange rate flexibility and a hike in the bank’s policy rate from 20% to 35%.
In a statement, the central bank said, “The MPC believes these measures will help mitigate emerging exchange rate risks, anchor inflation expectations, and stabilize prices in the short to medium term.”
Bloomberg News had previously reported a 44% devaluation of the ZiG, referencing four treasury dealers.
Independent economist Hapi Zengeni emphasized that it remains unclear whether the central bank would let the currency float freely or retain control, underscoring the complexity of Zimbabwe’s economic landscape. Zengeni noted that the official exchange rate often fails to align with the realities of the parallel market, which complicates trade, investment, and consumer behavior.
