Market forces to determine exchange rate, says RBZ

Image- InfoZimZw (RBZ Governor John Mushayavanhu)

The Reserve Bank of Zimbabwe (RBZ) says the country’s gold-backed currency Zimbabwe Gold (ZiG) should be allowed to float freely on the foreign exchange market.

This was said by the central bank’s deputy governor Innocent Matshe in Bulawayo recently, without giving more details as to when this would happen.

“The idea is to have price discovery that is not interfered with by administrative measures.

“The endgame is a floating exchange-rate which is free from interference,” he said.

Apparently, less than five months after it was introduced, the RBZ announced a devaluation of the ZIG.

The official devaluation on 27 September came a few weeks after the government started pushing for de-dollarisation.

RBZ said the devaluation was in response to a ‘resurgence in exchange rate pressures,’ which manifested in ‘the widening parallel market exchange rate premium and the increase in inflationary pressures.’

However, while the ZIG was devalued to about US$1:25, it was yet to catch-up with the parallel market, which hovered around US$1:32 at the time.

The latter was closer to renowned global inflation monitor Professor Steve Hanke’s estimate of over 67% devaluation of the ZIG since its introduction.

Zwnews