The Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu has said the gold reserves backing the ZiG (Zimbabwean Gold) currency have increased to over US$450 million, up from US$375 million in June this year.
He said this increase in gold reserves means the exchange rate will remain stable.
On September 27th, the RBZ adjusted the official exchange rate from ZiG14 per US$1 to ZiG24 per US$1.
However, by October 11th, the exchange rate had slid to ZiG26.33 per US$1, indicating a continued devaluation of the local currency since the initial adjustment.
In an interview with <a href="https://www.zbcnews.co.zw/rbz-assures-zimbabweans-of-currency-stability/">ZBC News</a> on Thursday, 10 October, Mushayavanhu said that the recent exchange rate movements cannot be described as a devaluation, but rather a response to market forces within the willing buyer and seller foreign exchange market. He said:
<blockquote>
First and foremost, what happened can not be described as devaluation. It was just a manifestation of the event on the ground where the parallel market had just set its agenda, including the retail sector and all the other economic agents in the economy.
</blockquote>
Mushayavanhu said the RBZ remains committed to economic stability and anchoring growth and does not expect any further significant movements in the exchange rate. He said:
<blockquote>
I am not expecting any further movements in the exchange rate. Let me give you some figures. As of yesterday, total deposits in this whole market were ZiG10.7 billion reserves, and our foreign reserves were US$450 million.
</blockquote>
Mushayavanhu further clarified the distinction between a gold-linked and a gold-backed currency.
He said the ZiG is backed by gold and other precious metal reserves, as well as foreign currency balances held with the Federal Reserve. Said the RBZ Governor:
<blockquote>
Our currency is backed by gold and other precious metals, and the foreign currency balances that we have with the Federal Reserve, there is a difference between backing a currency with gold and linking a currency to the prices of gold.
</blockquote>
Meanwhile, economic commentator Professor Gift Mugano has expressed scepticism about the RBZ’s ability to stabilise the exchange rate.
According to Mugano, the central bank lacks control over the excessive liquidity being injected into the economy by the Treasury.
Mugano predicted that in the coming weeks, several factors will contribute to further exchange rate volatility. Firstly, the government will be funding the upcoming agricultural season, which requires significant financial resources.
Secondly, there will be bonus payments and increases in ZiG (Zimbabwean Gold) salaries. Thirdly, the government will be increasing payments to contractors ahead of the rainy season.
Finally, the Treasury will be making last-minute payments to ministries, departments, agencies, and suppliers before the end of the fiscal year, as is typically the case in December.
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The Reserve Bank of Zimbabwe has a lot of gold to support the ZiG currency, worth over US$450 million. The exchange rate will stay stable because of this. The official exchange rate was adjusted recently, but it has been falling again. The RBZ Governor thinks that the exchange rate won't change much more. But some experts are not sure the RBZ can keep it stable because there is too much money in the economy. They think that the exchange rate might change a lot soon because the government needs to pay for many things.

ZiG Currency Gold Reserves Reach US$450 Million - RBZ

Economist Professor Gift Mugano has called on the government to clarify the relationship between the value of the Zimbabwe Gold (ZiG) currency and gold, as well as other precious metals.
Mugano asserted that the government appears to have changed its stance on exchange rate determination and should provide an explanation of how fluctuations in gold prices affect the ZiG exchange rate.
Posting on X, Mugano noted that when the Reserve Bank of Zimbabwe (RBZ) launched the ZiG in April 2024, the initial exchange rate of ZiG to USD was calculated as follows:
<blockquote>
– ZiG1 = 1 milligrams of gold (ZiG1 = 1/1000)
– Price of 1 gram of gold on 5 April 2024 = US$73.3
– 1 milligrams of gold (i.e., ZiG1) = 73.3/1000 = US$0.0733
-Using a direct formula of exchange rate determination, US$1 = 1/0.0733 = ZiG13.64
If we use the same formula &amp; take into account the price of gold which has since shot to US$85.52 per gram (i.e., US$2,653.25 today), our new exchange should be:
US$1 = 1/0.08552 
US$1 = ZiG11.69
Ko US$1 = ZiG25 (exchange rate after devaluation) yabvepi?
Please give us the correct government position on the ZiG exchange rate determination &amp; gold price movement nexus so that we can speak we are guided accordingly.
</blockquote>
Mugano also urged the government to reconcile statements made by Finance Minister Mthuli Ncube on Wednesday with an excerpt from the RBZ’s Monetary Policy Statement (MPS) that explains the value of the ZiG in relation to other currencies. An extract of the MPS reads as follows:
<blockquote>
17. What is going to determine the exchange rate of the structured currency in relation to other currencies?
The starting exchange rate shall be determined by the prevailing closing interbank exchange rate as at 5 April and the London PM Fix price of Gold as at 4 April 2024. The intervening exchange rate shall be determined by the inflation differential between ZiG and USD inflation rates and the movement in the price of the basket of precious minerals held as reserves. The weights will be determined by the composition of reserve assets.
</blockquote>
Mugano was responding to remarks made by Minister Ncube during an interview with journalists in Mt Hampden on Wednesday, following President Emmerson Mnangagwa’s State of the Nation Address (SONA) to Parliament.
During the interview, Ncube was asked to explain the central bank’s decision to devalue the ZiG by 42.55 per cent against the United States dollar while gold prices were on the rise.
In his response, Ncube stated that although the ZiG is backed by gold, its exchange rate is not fixed to gold prices. He said:
<blockquote>
There is a difference in fixing an exchange rate and there is a difference in backing an exchange rate. Gold backs the exchange rate. So as I speak, our reserves are about US$370 million.
And the central bank has been intervening in the market and has been able to sell the gold which is backing the ZiG to supply the market with much-needed US dollars for importation purposes.
</blockquote>
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Economist Gift Mugano wants government to explain how gold prices affect ZiG exchange rate. When ZiG launched, 1 USD = ZiG13.64, now should be ZiG11.69. Mugano asks for clear government position on ZiG exchange rate and gold price connection. Mugano also wants government to clarify statements made by Finance Minister Mthuli Ncube on ZiG devaluation. Ncube says ZiG backed by gold, but exchange rate not fixed to gold prices. Central bank selling gold to get US dollars for imports.

"Exchange Rate Should Be ZiG11.69 Per US$1"

Finance Minister Mthuli Ncube said the Zimbabwe Gold (ZiG) currency is indeed backed by gold, but its exchange rate is not tied to gold.
Ncube made these remarks during an interview with journalists in Mt Hampden on Wednesday, following President Emmerson Mnangagwa’s State of the Nation Address (SONA) to parliament.
In recent days, many Zimbabweans have questioned how the central bank devalued the ZiG by 42.55 per cent against the United States dollar while gold prices were rising.
Ncube clarified that while the ZiG is backed by gold, its exchange rate is not fixed to it. He said (via <a href="https://www.herald.co.zw/salary-review-for-civil-servants/">The Herald</a>):
<blockquote>
There is a difference in fixing an exchange rate and there is a difference in backing an exchange rate. Gold backs the exchange rate. So as I speak, our reserves are about US$370 million.
And the central bank has been intervening in the market and has been able to sell the gold which is backing the ZiG to supply the market with much-needed US dollars for importation purposes.
</blockquote>
Ncube said enough reserves are backing the money in circulation. He added:
<blockquote>
But the issue is about the exchange rate. The rate itself as opposed to the backing, but adequate reserves are backing the ZiG.
</blockquote>
Ncube said the government will implement measures to address the resurgence of the forex black market, but he declined to disclose the specific actions or timeline for these measures.
The Minister also said discussions are ongoing within the framework of the Tripartite Negotiating Forum (TNF) to improve the working conditions for civil servants. He said:
<blockquote>
Yes, we have to, I think we have to. We are looking into it and we are already negotiating through the Tripartite Negotiating Forum to adjust the wages of civil servants.
Hopefully, we will reach an agreement soon and then we can move forward and assist the civil servants.
</blockquote>
He said the adjustments will be implemented before the end of the year, adding that the induced devaluation of the local currency made the salary adjustment necessary. He said:
<blockquote>
It is a matter that we are already looking into. That is why I mentioned that it will require some adjustment in wages.
Wages have to be adjusted both in the public sector and private sector to improve the buying power of wages for workers, so that has to happen.
But that is what happens when a currency is adjusted. It causes those other negative impacts.
But also there are other positive impacts on the business front. We are determined to save jobs in our formal economy.
</blockquote>
It’s important to recognise that the exchange rate of a currency backed by gold can vary according to market conditions, supply and demand, and other economic factors.
In contrast, a currency fixed to gold (commonly referred to as a gold standard) maintains a set exchange rate with gold, meaning the currency’s value is directly linked to the price of gold.
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Zimbabwe's ZiG currency is backed by gold, but its exchange rate is not fixed to gold, according to Finance Minister Mthuli Ncube. This means that the value of ZiG can change depending on market conditions and other factors. The Minister also mentioned that discussions are happening to improve civil servants' wages and working conditions. Adjustments to wages will be made before the end of the year due to the devaluation of the local currency. Overall, it's important to understand that a currency backed by gold can have a flexible exchange rate, unlike a currency fixed to gold.

ZiG Is Backed By Gold, But Not Fixed To Gold, Says Mthuli Ncube

Minister of Finance, Economic Development, and Investment Promotion, Mthuli Ncube, has said civil servants will soon receive a salary increase to help mitigate the effects of a recent decision by the Reserve Bank of Zimbabwe (RBZ) to devalue the ZiG by over 40%.
In interviews with journalists following President Emmerson Mnangagwa’s State of the Nation Address (SONA) to parliament on Wednesday, October 2, Ncube explained that the devaluation was intended to close the gap between the official and parallel market values of the local currency.
He acknowledged that the decline in the ZiG has affected salaries, hence the need to restore their purchasing power. However, Ncube said salaries for civil servants will not be fully restored. He said:
<blockquote>
Putting in place a flexible exchange rate or devaluation does have an impact immediately on incomes, on prices.
And for us as a government, we will make some adjustments, naturally, to civil service salaries to make sure that the purchasing power of the salaries is somewhat restored.
Maybe not in full, but because someone wants to get in there. So, there is bound to be pain, there’s bound to be impact, and that’s what happens with any policy.
Any policy does have negative impacts and that’s what will happen. But we will make some adjustments to make sure that those who are losers can be compensated somewhat.
It won’t be everybody who will be looked after, but we’ll do our best.
</blockquote>
Meanwhile, about a fortnight ago, civil servants’ representatives rejected a Cost of Living Adjustment (COLA) offer presented by the government during a National Joint Negotiating Council (NJNC) meeting.
The Zimbabwe Confederation of Public Sector Trade Unions (ZCPSTU) said that they had decided to escalate the matter to higher authorities for further engagement.
This means that even if civil servants receive a salary increase now, which Ncube acknowledged will not bring their salaries back to pre-ZiG devaluation levels, they will still be worse off and unlikely to feel satisfied.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

The government is going to increase the salaries of civil servants in Zimbabwe because the value of the local currency has decreased a lot. This decrease is causing problems for people who work for the government. The Finance Minister said that even though the salaries will be increased, they won't go back to what they were before. This means that the civil servants may still not be happy with their pay. The union for civil servants rejected an offer from the government, so the issue is still not solved.

Civil Servants To Get Salary Increase

President Emmerson Mnangagwa has said the adoption of the Zimbabwe Gold (ZiG) in April 2024 was a significant move towards stabilising the domestic currency.
The Zimbabwe Gold currency was launched on April 8, replacing the Zimbabwean dollar, which had depreciated by 80% in the first three months of 2024.
During the opening of the Second Session of the 10th Parliament at the Parliament Building in Mt Hampden this Wednesday, Mnangagwa said that the Reserve Bank of Zimbabwe has introduced greater flexibility in the willing-buyer willing-seller arrangement to encourage foreign currency holders to engage in the forex market. He said:
<blockquote>
Currency stabilisation is at the core of macroeconomic 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.
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.
</blockquote>
Mnangagwa also said the government is committed to supporting the currency by allocating 50% of royalties to build reserves.
The President disclosed that foreign currency inflows from exports have risen from US$7 billion in 2023 to US$8 billion in 2024. He added:
<blockquote>
Our country’s banking sector is on sounding footing, with sufficient capital and liquidity buffers, while profitability, asset quality and liquidity matrix have also remained stable.
However, we note with concern the resurgence of parallel market activities driven by speculative tendencies.
Corrective measures are being instituted to protect all Zimbabweans from economic disruptions.
</blockquote>
Launched in April 2024 at an initial rate of ZiG13.50 to US$1, the ZiG was initially presented as a remedy for Zimbabwe’s ongoing economic crisis. However, it has experienced significant devaluation on the black market.
On September 27, the RBZ set the official exchange rate at ZiG24.3 per US$1, up from ZiG14.1 per US$1.
As of October 2, 2024, the official ZiG rate against the US dollar was ZiG25.2 per US$1, according to the central bank’s website.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

The President of Zimbabwe, Mnangagwa, says using ZiG gold as currency helps stabilize money. The new currency replaced the old Zimbabwean dollar that lost value. The Reserve Bank of Zimbabwe allows more flexibility in buying and selling foreign currency. The government supports the currency by saving royalties. More money is coming in from exports. Banks are strong, but the black market is a problem. The official exchange rate for ZiG to US$ went up. The official rate on Oct 2 was ZiG25.2824 per US$1.

ZiG Launch Key To A Stable Domestic Currency - Mnangagwa

Zimbabwe’s gold-backed currency, the ZiG, which was devalued by 43% by the Reserve Bank of Zimbabwe (RBZ) on Friday, September 27, continued to decline against the United States dollar on Monday.
According to data on the central bank’s website, the ZiG was quoted at 24.88 per dollar, up from 24.39 on Friday.
On Friday, September 27, the RBZ set the official exchange rate at ZiG24.3 per US$1, a significant increase from ZiG14.1 per US$1.
Lyle Begbie, an economist at Oxford Economics, said that while recent adjustments are positive, they are unlikely to be sufficient.
He added that ongoing current account and fiscal deficits, coupled with limited access to external capital markets, will continue to exert significant pressure on the ZiG currency.
RBZ Governor, John Mushayavanhu, in an interview with the state-controlled Sunday Mail newspaper, said that the devaluation was necessitated by an artificial spike in demand for foreign currency, combined with inflationary pressures. He said:
<blockquote>
The underlying value of the structured currency (ZiG) is designed to mimic the movement in the prices of reserve assets backing it and the inflation differentials.
In this regard, as communicated in the April 2024 Monetary Policy Statement, the intervening exchange rate shall be determined by the inflation differential between ZiG and USD inflation rates and the movement in the price of the basket of precious minerals held as reserves.
In this regard, while the gold price has been firming, suggesting appreciation of the gold price-implied exchange rate, the country has witnessed increased inflationary pressures as evidenced by month-on-month inflation of 1,4 per cent in August 2024 and 5,8 per cent in September 2024, thus offsetting the firming gold price.
This has, therefore, underscored the need for a price discovery mechanism to align the exchange rate with the macroeconomic dynamics underpinning the structured currency.
The movement in the exchange rate is expected to play a critical shock-absorbing impact on the prevailing excess liquidity in the economy, which helps anchor inflation expectations and minimise the inflation differentials going forward.
</blockquote>
The ZiG, which is supported by Zimbabwe’s gold and hard-currency reserves, was introduced in early April to replace the Zimbabwean dollar, which had plummeted by approximately 80% in value since the beginning of the year.
According to Mushayavanhu, the current reserves for the ZiG amount to US$380 million.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Zimbabwe's ZiG money lost value after the bank changed its value. The change happened because the ZiG wasn't worth as much as before. The ZiG lost more value against the U.S. dollar after the change. The bank explained that the ZiG's value depends on gold and other precious things they have. The ZiG replaced the old Zimbabwean dollar because it was losing value too fast. The bank hopes the ZiG will balance out the economy and keep prices stable.

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