ZIG CURRENCY PLUNGES 44% AS ZIMBABWE ALLOWS MARKET FORCES TO TAKE OVER
Zimbabwe’s new gold-backed currency, called the ZiG, lost 44% of its value on Friday in the official market. This big fall has shocked many people across the country, raising fresh concerns about Zimbabwe’s struggling economy.
The fall came shortly after the Reserve Bank of Zimbabwe’s monetary policy committee had a meeting. After the meeting, Reserve Bank governor Dr. John Mushayavanhu said the bank had decided to allow “greater exchange rate flexibility.” He said this move was made after looking at Zimbabwe’s recent financial and economic situation, including the rising demand for foreign currency.
Soon after that announcement, the official exchange rate of the ZiG dropped from 14 to 1 U.S. dollar to 25 to 1. This sudden change means the ZiG became almost half as valuable overnight.
The ZiG was only introduced in April 2024. At that time, the government claimed it was backed by gold and foreign reserves and promised it would be stable. But many people were already doubting it from the start, and Friday’s collapse has confirmed their fears.
Tapiwa Mupandawana, a Zimbabwean economist and PhD student based in Zambia, said the fall in the ZiG’s value was actually a move towards its real market value. He said Zimbabwe’s currency cannot be stable if the economy itself is not strong.
“The value of a currency comes from the country’s ability to produce goods and services,” said Mupandawana. “You cannot have a stable currency if you do not have a stable economy.”
Prosper Chitambara, a senior economist at the Labour and Economic Development Research Institute of Zimbabwe (LEDRIZ), agreed. He said that while the currency drop looks bad, it could actually be a step in the right direction.
Chitambara said letting market forces decide the value of the currency might help stabilize the exchange rate in the long run. He explained that most Zimbabwean businesses were already using black market rates when pricing their goods, so the official drop might not change much in everyday life.
“I don’t think this will have a major effect on prices,” Chitambara said. “Most businesses were already using the black market rate to decide how much to charge.”
Before Friday’s change, the black market rate for the ZiG was around 35 to 1 U.S. dollar. After the official fall, the black market rate jumped to 50 to 1, showing just how wide the gap is between the official rate and what people actually use.
The ZiG is now Zimbabwe’s sixth currency attempt since 2009, when the original Zimbabwe dollar collapsed due to hyperinflation. At its worst, Zimbabwe’s old money became so worthless that people had to carry huge bags of cash just to buy bread.
This latest currency, backed by gold and a few hundred million U.S. dollars in reserves, was introduced with high hopes. But many economists warned that unless Zimbabwe fixes its economy, no currency—gold-backed or not—will be trusted by the public.
Now, with the ZiG dropping fast and the black market stronger than ever, Zimbabwe is once again at a crossroads. Many fear this is the start of yet another failed currency experiment.
Ordinary Zimbabweans are worried. Prices in shops may go up. Workers who are paid in ZiG may find their salaries losing value again. And savings in local banks may be worth less by the day.
As Zimbabwe heads deeper into this financial crisis, one thing is clear: without a strong economy and real reforms, no currency will work.
