Prominent businessman Tawanda Nyambirai has called on the Reserve Bank of Zimbabwe (RBZ) to provide clarity regarding the sharp devaluation of the Zimbabwe Gold (ZiG) currency, especially since it is supposed to be backed by gold, which is experiencing rising prices.
On Friday, September 27, the central bank devalued the ZiG by over 40% against the US dollar, changing the exchange rate from 14.1 ZiG per dollar to 24.3 ZiG per dollar.
In a post on X, Nyambirai warned that an official devaluation without explanation about the expected relationship between the ZiG and gold prices raises significant concerns and undermines trust in the currency.
He added that this situation suggests the currency may be based on falsehoods, further questioning the Reserve Bank of Zimbabwe’s credibility in managing its currency. Wrote Nyambirai:
The ZIG is supposed to be anchored on gold. Since its introduction, the gold price has gone up significantly. The ZIG has done the opposite. An official devaluation without explaining the correlation that is supposed to exist between the ZIG and the gold prices raises more questions than answers. It completely undermines trust in the ZiG. It creates the impression that a currency was anchored on lies! How can the RBZ undermine the basis on which it launched its own currency like this?
When RBZ Governor John Mushayavanhu launched the ZiG on April 5, 2024, he stated that the new currency would be backed by foreign currencies, gold, and precious minerals. He also announced that the central bank would implement a market-determined exchange rate.
The day before the launch, Mushayavanhu claimed that the central bank held 1.1 tonnes of solid gold, nearly 1.5 tonnes stored abroad, and $100 million in cash and precious minerals, including diamonds.
Mushavanhu claimed that if these minerals were converted into gold, they would account for an additional 0.4 tonnes.
In total, he asserted that the reserves were valued at $285 million, which he said was “more than three times the cover for the ZiG currency being issued.”
On September 27, the central bank increased its policy rate in response to sustained pressure on the ZiG currency.
The ZiG represents Zimbabwe’s sixth attempt at establishing a stable currency in 15 years, following a period of hyperinflation under former leader Robert Mugabe.
Independent economist Hapi Zengeni, quoted by Reuters, pointed out that the central bank has not clarified whether the currency will float freely or if it will continue to control the exchange rate after the devaluation.
She highlighted the complexities in Zimbabwe, where the official exchange rate does not align with the realities of the parallel market, leading to significant challenges for trade, investment, and consumer behaviour.
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