- The ZiG is valued at 26.7279 against the USD, marking its weakest performance year-to-date
- It has been on a downward trend since the beginning of the year, hitting a low of 26.7116 on January 22, 2025
- The exchange rate premium for ZiG has decreased from 50 ZiG/USD in late October 2024 to 34 ZiG/USD currently
Harare-The Zimbabwe Gold (ZiG) has depreciated against the United States Dollar (USD), recording an exchange rate of 26.7279 on 25 March 2025, extending a loss-making streak observed since the commencement of the year.
This drop reflects the currency's weakest performance year to date, indicating serious vulnerabilities within Zimbabwe’s monetary framework, despite the implementation of stringent monetary policies.
The ZiG reached its lowest point on January 22, 2025, trading at 26.7116.
In an effort to stabilize the currency, the Reserve Bank of Zimbabwe (RBZ) has resorted to aggressive monetary tightening, including raising benchmark borrowing rates to 35% and increasing Statutory Reserve Requirements (SRRs) to 30% for demand deposits and 15% for savings and fixed deposits across both domestic and foreign currencies.
While these measures have effectively restricted liquidity and curtailed money supply growth, they haven’t failed to create demand.
In contrast to regional counterparts like South Africa, which maintains the stability of the rand through strong export-driven foreign exchange inflows, Zimbabwe’s strategy lacks a solid foundation in economic fundamentals.
The RBZ’s attempts to support the currency have revealed significant flaws in execution.
Reports indicate that the government ceased supplier payments in December 2024 as a liquidity-preservation measure, a strategy that has persisted into the first quarter of 2025.
Although partial payments resumed in January, they have been minimal, effectively rationing the circulation of the ZiG.
A shift towards a creation economy, characterized by domestic production and value addition such as the beneficiation of gold or lithium could enhance demand for the ZiG and bolster foreign exchange reserves.
This would reduce dependence on artificial currency pegs and surrender mandates.
Meanwhile, in parallel markets, the exchange rate premium of ZiG against the USD has decreased from a peak of 50 ZiG per USD in late October 2024 to 34 ZiG per USD currently.
This change indicates tighter arbitrage spreads and diminishing speculative interest, although a persistent 27% premium still remains.
For businesses, this premium, combined with a 1% Importation Minimum Tax (IMMT), royalties, and a 30% foreign exchange surrender requirement, significantly impacts profit margins.
Therefore, to foster long-term economic sustainability, government must work to create greater demand for the ZiG by correcting confidence deficit, policy slippages and liking its own currency.
A functional production sector is essential for revitalising the economy and ensuring that the ZiG can regain stability and foster growth, it boosts domestic output, creates jobs, and reduces reliance on imports while enhancing exports to strengthen foreign exchange reserves.
However , this requires addressing critical issues such as electricity shortages and high taxation that has been weighed on businesses and the economy.
The abandonment of relying on quasi-fiscal measures, subsidies, and manipulative rate-setting is also very pivotal.
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