Zimbabwe central bank put $50m in market before 43% ZiG devaluation

Zimbabwean President Emmerson Mnangagwa promised ‘corrective measures’ to deal with the currency collapse in a state-of-the-nation address to lawmakers Wednesday.

Zimbabwe put $50 million in the interbank currency market days before the 43% devaluation of its gold-backed currency, Business Weekly reported.

The Reserve Bank of Zimbabwe’s foreign-currency injection was in addition to $64 million that it provided in early September, the state-owned Harare-based newspaper reported Friday, citing Governor John Mushayavanhu. That brought the central bank’s total intervention last month to $114 million.

Lenders bought only $34 million in the interbank market last week, the newspaper cited the governor as saying. The central bank is determined to continue meeting bona-fide foreign-currency needs of the market, it cited Mushayavanhu as saying.

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The ZiG, short for Zimbabwe Gold, is the southern African nation’s sixth attempt at a functioning local currency in 15 years. The ZiG is backed by gold, precious minerals and foreign-currency reserves. The central bank devalued the unit by 43% on September 27 in a bid to stem the local currency’s slump on both the official and unofficial markets.

On the same day, the central bank hiked the benchmark interest rate to 35% from 20% to tackle an inflation surge and the currency collapse.

Still, that action hasn’t yet turned around the ZiG’s fortunes. It has weakened 5.7% against the US currency since last week’s devaluation. The bullion-backed unit was trading Friday at 25.35 per dollar, according to data posted on the central bank’s website.

It is trading for even less on the parallel market and is being quoted at between 30 and 40 to the dollar, according to ZimPriceCheck.com, a website that monitors official and unofficial exchange rates.

Meanwhile, Zimbabwean President Emmerson Mnangagwa promised “corrective measures” to deal with the currency collapse in a state-of-the-nation address to lawmakers Wednesday. He provided no further details.

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