Zimbabwe says basic goods in limited supply after ZiG devaluation

Zimbabwe said the steep devaluation of its gold-backed currency last month has triggered shortages of bread, sugar and other staples in its formally regulated stores, suggesting the country's latest effort to stand up its local unit is still struggling.

"This is attributable to arbitrage, as informal retail economic agents seek to capitalise on exchange-rate differentials," Information Minister Jenfan Muswere said on Tuesday.

He cited reports of hoarding items to sell in street markets and other unregulated outlets at the higher unofficial exchange rate.

Zimbabwe devalued the ZiG – short for Zimbabwe Gold – by 43% on 27 September after it slumped on the unofficial market amid doubts the country's sixth attempt at a local currency since 2009 would work.

"Zimbabwe lacks fiscal discipline. We spend more than we earn," London-based fund manager Ritesh Anand told Zimbabwe-based media presenter Trevor Ncube. "We fund that spending through printing. And the printing ultimately erodes the value of the currency."

The ZiG was lowered by the central bank to 24.4 per dollar from 14 per dollar. It was quoted at 25.97 per dollar on Wednesday by the central bank.

But that is still well above the unofficial market of between 40 and 50 ZiG per dollar, according to ZimPriceCheck.com, a website that monitors official and unofficial exchange rates.

The decline has come despite the ZiG being backed by gold and hard-currency reserves held at the central bank.

"You may have the gold reserves but what the central bank lacks is credibility," Anand said. "People don't trust the currency." The implications of that lack of confidence were playing out on the nation's streets.

The widening gap between the official and unofficial ZiG rates is funnelling business into the informal sector of the economy, where participants sell exclusively in dollars, at the expense of the formal sector, which has to accept payment in local currency.