Zimbabwe’s central bank has announced a significant adjustment to the official exchange rate, causing the country’s new currency, the ZiG, to plummet by over 40% against the US dollar.
Zimbabwe’s Central Bank made the official exchange rate an index from 14 to 24 ZiG/dollar by the end of last year in a bid to align with parallel market rates and current exchange rates. It is a gesture that Zimbabwe made in order to cut the gap between the official and parallel rates that the currency had been facing since 2024.
The ZiG is the new currency, which was introduced to the market in April 2024 to fix the problem of the Zimbabwean dollar that lost 80% of its value in 2024, found an alternative to the rapidly depreciating Zimbabwean dollar that dropped by 80% during 2024.
“Our decision to modify the exchange rate is a fundamental step towards containment and stabilization of the ZiG,” said John Mushayavanhu, Governor of the Reserve Bank of Zimbabwe. “Our commitment is to a freely-determined exchange rate.”
However, the inadequate handling of the currency by the Central Bank has wrought criticism from professionals. Sekai Kuvarika, President of the Confederation of Zimbabwean Industries, said that pegging the official rate at an artificial level has been the major problem, which has caused economic distortions.
“The parallel market premium has been driven up by this action, bringing a negative and doubling the already existing deficit,” Kuvarika added.
