RBZ Governor Explains ZiG Currency Devaluation Amid Rising Gold Prices

Written by on September 30, 2024

The Governor of the Reserve Bank of Zimbabwe (RBZ), Dr. John Mushayavanhu, has provided insights into the recent decline in the value of the Zimbabwe Gold (ZiG) currency, despite the increase in global gold prices.

On Friday, the RBZ devalued the ZiG by 44%, reducing its value from 13.99 to 24.39 per US dollar. Dr. Mushayavanhu explained that the ZiG’s value is influenced by the price of Zimbabwe’s reserve assets, including gold, and the inflation rate differences between the ZiG and the US dollar.

Although global gold prices have been on the rise, Zimbabwe’s escalating inflation has negated the potential benefits. In September 2024, inflation surged to 5.8%, offsetting the gains from higher gold prices.

Dr. Mushayavanhu emphasized the necessity of periodically adjusting the exchange rate for the ZiG to align with current economic realities. This process, known as price discovery, helps reflect the underlying macroeconomic dynamics.

The adjustment also plays a crucial role in absorbing excess liquidity in the economy, which in turn helps stabilize inflation expectations and minimize future inflation disparities.

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