Zimbabwe aims for its gold-backed currency to trade freely on the foreign exchange market, according to the central bank’s Deputy Governor, though he did not specify when this shift might occur.

Currently, the central bank sets a daily price and permits incremental day-to-day changes, but the central bank wants the price to be determined by market developments.

 

“The idea is to have price discovery that is not interfered with by administrative measures,” Innocent Matshe said in an interview in Bulawayo, the nation’s second-biggest city.

“The endgame is a floating exchange-rate which is free from interference.”

 

However, he maintained that the bank will not entirely abandon its responsibility of ensuring the market operates efficiently.

“All central banks do intervene in the market when the price discovery mechanism fails for one reason or the other,” he said.

 

The ZiG, supported by Zimbabwe’s gold and foreign currency reserves, was introduced in early April 2024 to replace the Zimbabwean dollar, which had depreciated by approximately 80% since the beginning of the year [2024]. It represents Zimbabwe’s sixth attempt in 15 years to establish a stable local currency.

INTRODUCING | Zimbabwe Introduces Zim Gold, the New Currency Backed by Gold and Precious Minerals – https://t.co/ncKtxrEzpg

— Jack Straw (@JackStr42679640) April 8, 2024

Since then, the currency has depreciated sharply on the black market, leading the central bank to devalue it by 43% on September 27 2024. As of November 7 2024, the street value was still significantly lower, trading at 35-40 ZiG per dollar, compared to the central bank’s official rate of 26.69 per dollar.

Businesses have criticized the central bank’s control over the official exchange rate, arguing that it results in an overvalued currency and leads to price distortions throughout the economy.

The apex bank devalued the ZIG by 43% in September 2024 after the gap between the official and unofficial exchange rates significantly widened, in part due to dollar shortages.

INFLATION | Zimbabwe Devalues the ZiG Local Currency in Response to Rising Demand for Dollars

Monthly inflation accelerated to 5.8% in September 2024, up from 1.4% in August 2024.https://t.co/Hy1xbI3iX9 $ZiG #Zimbabwe #Inflation #Africa pic.twitter.com/GYlcZJA8SN

— BitKE (@BitcoinKE) September 30, 2024

 

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