Zimbabwean authorities are attempting to assure markets that the recent 43% devaluation of the local currency against the dollar was a “once-off” move and the fundamentals are in place for future stability.

Reserve Bank of Zimbabwe (RBZ) governor John Mushayavanhu said in an interview with the state-owned broadcaster that the central bank expects the Zimbabwe Gold (ZiG) will stabilise with prices falling.

ZiG deposits, he said, are around $10.7bn which is equivalent to $406mn.  The gold and foreign currency reserves that back the local note have risen from $285mn in April to $450mn.  He assured markets that the RBZ will keep a tight leash on money supply.

“Money supply also increases through credit creation by banks and the recent move that we took to increase statutory reserves and up the bank policy rate will slow down credit creation,” he told the Zimbabwe Broadcasting Corporation on October 11.  

The southern African nation introduced the ZiG in April 2024, after ditching the local dollar whose value had been eroded by hyperinflation.  At its introduction, the ZiG was officially trading at around 13.5 to the dollar.  It held on for some three months but pressure mounted on it later, which forced authorities to allow it to decline to 24.88 to the greenback in late September. The currency had further weakened to 26.36 as at October 14 while on the streets of Harare, the capital it was trading at between 40 and 50 to the dollar.

Due to the instability of the ZiG, most local businesses are shunning it, choosing to transact in the dollar and the South African rand instead.

However, Finance Minister, Mthuli Ncube, New Zimbabwe wrote on October 12, the transacting public must not worry.

"At the current exchange rate of $1: ZWG25 what happens is that currently we have enough reserves to cover the entire ZWG deposits in our banking sector,” he said.

"The local currency deposits are ZWG10bn and the value of reserves are $425mn worth of reserves. Calculating this at an exchange rate of 25 also amounts to ZWG10bn."

The increase in interest rates from about 20% to 35% and hike in reserve requirement, he added, will boost the ZiG.