Zimbabwe has devalued its gold-backed currency, the Zimbabwe Gold (ZiG), selling it to banks at a rate 44% lower than the prevailing dollar exchange rate, according to several treasury dealers.
The official exchange rate has now shifted to 25 ZiG per dollar, up from 14, Bloomberg reported.
This move is a reaction to the persistent struggles in the unofficial market for the ZiG, which marks Zimbabwe’s sixth attempt in just 15 years to create a stable local currency.
Introduced in April, the ZiG was meant to take the place of the Zimbabwean dollar, which had plummeted in value by 80% earlier this year.
Unlike its predecessors, the new currency is fortified by 2.5 tons of gold and $100 million in foreign currency reserves held by the central bank, aiming to instil confidence in a beleaguered economy.
Earlier this year, Zimbabwean President Emmerson Mnangagwa declared that the ZiG would become the sole legal tender by 2030, phasing out the existing multicurrency system.
Central Bank Governor John Mushayavanhu assured that lessons from past failures had been learned. He noted that the government would refrain from printing additional ZiG notes to fund its borrowing unless sufficient reserves were available to back the new currency.
However, analysts caution that the new currency will struggle for stability unless the country addresses its current account and fiscal pressures.
Zimbabwe has been grappling with a scarcity of foreign currency inflows and has been excluded from international capital markets since defaulting on its debts in 1999.
