The USD to ZIG exchange rate has performed well this year, despite the US dollar index’s decline and increased volatility. The USD/ZWG exchange rate was trading at 26.8 today, July 16, slightly higher than the January 2 level of 25.8.
However, this exchange rate was much higher than the initial one of about 13.8 in April last year. Additionally, ZimPriceCheck was quoting a black market rate between 38 and 40.
The Zimbabwe ZiG has held steady this year because of the surging reserves, helped by the rising gold prices. Gold began the year at around $2,500 and then surged to a record high of nearly $3,500 as global demand increased amid heightened geopolitical risks.
Zimbabwe’s gold output has also surged, helping to boost the country’s currency reserves. Output jumped by 46% in the first quarter to 20,104 kilograms, while the June figure soared 63%.
As a result, Zimbabwe’s central bank noted that it now holds 3.4 tons to back the currency, up from 1.5 tons a year ago. This means that the gold reserves backing the currency have increased to over $370 million. With the dollars included, the total reserves have jumped to over $500 million.
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IMF is Pushing the Use of the ZiG as the Sole Currency
The USD to ZiG exchange rate has also been highly stable, as the IMF has pushed the country to make it the sole currency. That would be a significant change, as the US dollar is currently the primary currency used to handle most transactions in Zimbabwe.
The ZiG has also held steady due to the high interest rates set by the central bank, which have made a carry trade possible. The bank has pushed rates to 35%, making it easier for people to borrow US dollars and invest in ZiG-based money market funds.
Furthermore, analysts anticipate increased demand for ZiG after Namib Minerals announced plans to invest $400 million in reviving two gold mines in the country.
At the same time, the country is hoping to start servicing its external debt for the first time since 1999, thanks to its low debt-to-GDP ratio. By doing that, the government hopes to restructure $21 billion of debt in the coming months.
Still, the future of the Zimbabwe ZiG is uncertain because most people remember the collapse of the previous five currencies. As such, most of them still save in the US dollar to safeguard their capital. The US dollar remains the primary currency used to settle over 70% of all transactions in the country.
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