Zimbabwe’s Gold-Backed Currency Strengthens Amid Central Bank’s Tightened Monetary Policy

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Harare – Zimbabwe’s gold-backed currency, the Zimbabwe Gold (ZiG), has recorded its first gain in over two weeks, a sign that a recent tightening in monetary policy may be stabilising the currency, according to the country’s central bank.

On Monday, the ZiG appreciated by 2.4%, reaching 27.9986 per US dollar, marking its first rise since October 17, as reported by the Reserve Bank of Zimbabwe (RBZ). While the currency continues to trade at a discount of 35 to 40 per dollar on the unofficial market, this represents an improvement from the previous rates of 40 to 50 per dollar.

“The recent uptick is due to the measures implemented by the Monetary Policy Committee (MPC),” said Persistence Gwanyanya, a member of the RBZ’s monetary policy committee, in a phone interview on Monday. “We expected the ZiG to strengthen under these conditions, and that’s exactly what we’re seeing,” he added.

The central bank recently took steps to bolster the currency by devaluing the ZiG by 43% against the dollar on September 27. The move was coupled with a significant interest rate hike from 20% to 35%, aimed at curbing inflation and stabilising the currency’s value.

The ZiG is Zimbabwe’s sixth attempt in 15 years to establish a stable local currency that could potentially replace the US dollar as the primary medium of exchange in the country.

Finance Minister Mthuli Ncube is expected to unveil additional measures in his upcoming budget this month to increase demand for the ZiG. According to Gwanyanya, these steps could include mandating the use of ZiG for various government payments, such as utilities, customs duties, and local council fees.

“This enhanced demand for ZiG will complement the current monetary policies and contribute to sustainable stability,” Gwanyanya stated.

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Source: Bloomberg