Zimbabwe Says it’s Currency is Deeply Undervalued
Zimbabwe’s central bank governor says the country’s currency is significantly undervalued, arguing that its true value is closer to half its current market price when measured against foreign reserves and gold backing.
“If we wanted to buy back all the local currency in circulation using our reserves, we could do so at an exchange rate of around 15 to the dollar,” said John Mushayavanhu. The Zimbabwe Gold (ZiG) currency currently trades between 25 and 28 against the US dollar.
The currency is Zimbabwe’s sixth attempt in 15 years to establish a stable local currency, and it is backed by 2.5 tons of gold and $100 million in foreign currency reserves held by the central bank.
Mushayavanhu said restoring confidence remains the central challenge for the central bank in a country still defined by memories of hyperinflation and repeated currency collapses, Bloomberg reported.
“It’s a function of the confidence of the market in the central bank, and we’re still trying to rebuild that confidence. We had lost it and we’re trying to rebuild it,” he said during an interview on the sidelines of the IMF–World Bank Spring Meetings in Washington.
Despite progress in stabilising the exchange rate and bringing inflation down to single digits for the first time in nearly three decades, dollarisation remains deeply entrenched. More than 90% of daily transactions are still conducted in US dollars, according to the Confederation of Zimbabwe Industries.
Inflation Outlook, Growth Forecast, and External Risks
Annual inflation stood at 4.4% in March, up slightly from 3.8% in February but sharply lower than levels above 50% when Mushayavanhu took office. The central bank has kept interest rates at 35% as it assesses risks from global shocks, including rising fuel and fertiliser costs linked to geopolitical tensions.
The governor also warned of emerging domestic risks, including the prospect of a strong El Niño weather pattern later this year, which could trigger drought and force grain imports. That, he said, would place additional pressure on foreign exchange reserves.
He noted that Zimbabwe holds about $1.4 billion in foreign reserves, including gold, which he said is sufficient to cushion short-term external pressures. Gold production rose 8.3% in the first quarter to 9,312 kilograms, generating $843.3 million in export earnings, compared with $395.9 million in the same period last year.
Looking ahead, Mushayavanhu said inflation is expected to remain in single digits this year, even amid external shocks. The economy is projected to grow by around 5%, down from an earlier estimate of 8%.
He also cautioned against moves to legislate exclusive use of the ZiG by 2030, saying such a policy should only proceed if key economic conditions are met.
