ED hopeful despite ZiG chaos
CLOUDINE MATOLA
In his State of the Nation Address (SONA) yesterday, President Emmerson Mnangagwa expressed optimism in spite of economic devastation brought about by the free fall of the local currency, the Zimbabwe Gold (ZiG), whose value plunged against all major currencies.
Last Friday, the value of ZiG plunged by more than 40% on the formal market. It traded at ZWG24.3902:US$1 from ZWG13.9987:US$1.
Yesterday, ZIG further depreciated , closing at ZWG25.7588:US$1 on the formal market.
On the parallel market, ZiG was trading at ZWG45:US$1, wreaking havoc in the market. Last week, ZiG was trading at ZWG30:US$1.
Additionally, the prices of goods have skyrocketed , making them unaffordable for many.
Consequently, the rate of inflation spiked. According to ZIMSTATS, ZiG vulnerabilities caused the month-on-month inflation rate for the month of September to jump to 5.8% from 1.4% in August 2024, driven by persistent weaknesses in ZiG.The 4.4 percentage point increase in month-on-month inflation marks the most significant rise since ZiG’s introduction.
Annual inflation rate for September also shot up to 4.2% from 3.74% in August.
ZiG has experienced rising volatility since its April launch this year, exacerbated by a severe shortage of foreign currency, particularly the greenback.
Speaking during SONA, President Mnangagwa, said the uptick of the exchange rate was driven by speculation and was a cause for concern.
“Our country’s banking sector is on sound footing, with sufficient capital and liquidity matrix have also remained stable. However, we note with concern the resurgence of parallel market activities driven by speculative tendencies,” President Mnangagwa said.
He added: “Corrective measures are being instituted to protect all Zimbabweans from economic disruptions. Together, let us lay a solid foundation for economic prosperity, peaceful development and freedom from undue external interference.
“Currency stabilisation is at the core of macro-economic stability. The adoption of the Zimbabwe Gold (ZiG) in April 2024, was an important step towards stabilising the domestic currency anchored by our gold and precious metal reserves. It remains the duty of all of us to respect and abide by measures and instruments intended to maintain economic stability and tame inflation.”
Furthermore, President Mnangagwa declared that 50% of royalties would be set aside to create reserves as part of his administration’s continued commitment to support ZiG.
He also said “In response to the increased foreign currency pressures, and in a bid to deepen the foreign exchange market, the Reserve Bank allowed for greater flexibility under the willing-buyer willing-seller arrangement. The increased flexibility on the foreign exchange market is expected to further promote effective price discovery and encourage holders of foreign exchange to participate in the willing-buyer willing-seller market.”
