Currencies

Zimbabwe Devalues Currency, Raises Interest Rates to Curb Inflation

September 30, 2024
790 1 minute read
Zimbabwe Devalues Currency, Raises Interest Rates to Curb Inflation
Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya poses for a photograph with a sample of a gold coin during its launch in Harare, Zimbabwe, July 25, 2022 | Reuters

Zimbabwe’s Reserve Bank has devalued its gold-backed currency, the ZiG, by 43% and raised the benchmark interest rate to 35% from 20% amid skepticism over the currency’s viability.

The central bank’s website showed the ZiG trading at 24.4 per U.S. dollar, down from 14 per dollar earlier in the day.

While the central bank did not explicitly confirm the devaluation, Governor John Mushayavanhu announced measures to increase exchange rate flexibility and address inflation.

Monthly inflation surged to 5.8% in September from 1.4% in August, reflecting pressures on the ZiG due to rising food import prices and declining dollar revenues from mineral exports.

The ZiG, introduced in April as a gold-backed currency to replace the Zimbabwean dollar, has faced skepticism due to the country’s history of failed local currencies.

Also Read: Zimbabwe Begins Trading in Gold Backed Currency

Previous experiments with local currencies led to hyperinflation and a shift to the U.S. dollar.

The central bank has pledged not to print more ZiG than its reserves allow but analysts warn that the currency will struggle without addressing Zimbabwe’s deeper economic issues, including limited access to global capital markets and ongoing sanctions.

Other measures announced include raising reserve requirements on deposits and capping foreign currency withdrawals.

September 30, 2024
790 1 minute read
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Lawrence Baraza

Lawrence Baraza is a dynamic journalist currently overseeing content at Metropol TV Digital. With a keen focus on business news and analytics, Lawrence guides the platform in delivering insightful, data-driven content that empowers its audience to make informed decisions. Lawrence’s commitment to quality and his ability to anticipate market trends make him a key figure in the digital media landscape. His work continues to shape the way business news is consumed, making a significant impact in the field.

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