(Bloomberg) -- Zimbabwe’s bullion-backed currency has slid past 14 per dollar, its weakest level on the official market since it started trading five months ago.
The ZiG, short for Zimbabwe Gold, is also experiencing its longest-yet losing streak against the dollar, falling for 23 successive trading days. The local currency is trading at 14.01 to the US currency Friday, according to data posted on the central bank’s website. The parallel market quotes the unit at 28, or double the official rate, according to ZimPriceCheck.Com, a website that monitors both rates.
The widening gap is hurting formal businesses, according to the Confederation of Zimbabwe Industries, the nation’s largest manufacturing group.
“The central bank has suppressed the exchange rate for too long, resulting in a wide parallel-market premium” that is causing serious economic distortions, Sekai Kuvarika, the association’s chief executive officer, said in an emailed response to questions. “This has also worsened the situation, which could have been improved by accepting that the parallel market also needs to be reined in.”
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On April 5, the ZiG replaced the Zimbabwean dollar, which depreciated more than 80% against the dollar in 2024 and lost value every single trading day this year until it was abandoned. The gold-backed currency is the nation’s sixth attempt at having a functioning local unit since 2009.
The central bank on X recently said the “temporary shock” in the ZiG was due to “foreign currency supply-and-demand mismatches as preparation for the summer cropping season” picks up.
Speculative demand for dollars has spurred the weakness and the central bank will continue to intervene in the market to address transitory mismatches, Governor John Mushayavanhu in a Sept. 22 opinion piece published in state media.
It’s already injected $64 million into the interbank market.
Committing “to a market-determined exchange rate” and allowing the ZiG “to depreciate if that is what market sentiments demand” could also help reverse the currency’s decline, said Kuvarika. Zimbabwe’s Treasury could also help spur demand for the local unit by widening taxes payable in the currency including pay-as-you-earn and value-added tax, she said.
The ZiG is currently used in 40% of transactions, compared with 15% when it first started. Dollars, which are used to pay for everything from food to transport, make up the balance.
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