- It has depreciated by 0.9% week-over-week against the USD opening July at ZiG13.7026
- However, the currency continues to trade at significant discounts on parallel and black market
- The parallel market discounts by high dollarization, with many transactions still denominated in US Dollars rather than the local currency
Harare- The local unit, the Zimbabwe Gold (ZiG), has exhibited a week-over-week depreciation of 0.9% against the United States Dollar (USD), opening the new month of July at a spot rate of ZiG13.7026, as per the latest data disseminated by the Reserve Bank of Zimbabwe (RBZ), the country's central banking authority.
The ZiG, which was unveiled on April 5th, commenced trading at a level of ZiG13.56, and has since registered a 1% decline versus its inception price, underscoring the currency's performance hitherto.
Given the ZiG's gold-backed underpinnings and the government's fiscal prudence, the currency's volatility has been largely influenced by fluctuations in global bullion prices, which are currently trading at elevated levels.
In a bid to bolster confidence in the domestic legal tender, the government has taken proactive steps to enhance the ZiG's recognition on the international stage, evidenced by the alteration of the currency symbol from ZWL to ZWG, denoting "Zimbabwe Gold."
However, on the parallel market, the ZiG continues to trade in the range of ZiG17.5 to ZiG18 per USD on peer-to-peer platforms, while the black market has seen the local unit exchange hands at ZiG19 to ZiG21 per USD.
This divergence is primarily attributable to the prevalence of dollarization, wherein a significant portion of transactions, including for fuel, licenses, passports, capital goods, and essential services like rent and healthcare, are still denominated in the greenback rather than the domestic legal tender.
Consequently, individuals receiving ZiG-denominated payments tend to promptly convert them to USD on the black market, as access to USD liquidity within the formal banking system remains limited.
Furthermore, the market's lingering uncertainties regarding the long-term viability of the ZiG, given Zimbabwe's historical experiences with the Zimbabwe Dollar and Bearer Checks, have perpetuated a risk-averse sentiment, prompting economic actors to maintain their earnings in USD, thereby driving the black market rate.
This prevailing "confidence deficit" can only be addressed through the comprehensive indexation of all goods, services, and tax obligations in the local currency, a critical step in bolstering the ZiG's acceptance and usage across the national economy.
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