Zimbabwe’s central bank has reportedly allowed its gold-backed currency to depreciate by over 40% against the US dollar on Friday.
This development is part of the Reserve Bank of Zimbabwe’s (RBZ) efforts to stabilize the economy and address persistent exchange rate instability since the ZiG currency, short for Zimbabwe Gold, was introduced in April.
The central bank’s website gave the mid-rate for the ZiG currency as 24.3902 to the dollar on Friday versus 13.9987 on Thursday, a 42.6% fall, according to Reuters calculations.
In response to the currency devaluation, the central bank also raised its policy rate from 20% to 35% to manage inflation and stabilize prices with immediate effect.
The Reserve Bank of Zimbabwe said in a statement that its Monetary Policy Committee (MPC) met on Friday and decided to allow greater exchange rate flexibility.
The central bank said; “The MPC is convinced that the above measures will go a long way in addressing the emerging exchange rate risks, anchor the inflation expectations and stabilise prices in the near to short term.”
Bloomberg News previously reported that Zimbabwe had devalued the ZiG by 44%, citing treasury dealers.
The apex bank, Governor John Mushayavanhu, had also said it was taking steps, to combat inflation, including allowing “greater exchange rate flexibility, in line with the increased demand for foreign currency in the country.”
