Emerging-Market Currencies: Why Did Zimbabwe Devalue Its Gold-Backed ZiG?

Why did Zimbabwe devalue its currency so soon after introducing the ZIG? Good morning, Jennifer. Yeah, so it's been a week exactly since Zimbabwe devalued the currency. This was done by the central bank last week. They didn't use the term themselves of devaluation. They say they're allowing greater flexibility in the exchange rate. This has been spurred largely by the widening gap between the parallel market and the official market. That gap had been growing over recent weeks, and the Zimbabwean dollar had been losing value on both markets. That seemingly forced the central bank to act, and there was no other way for them but then to devalue the currency by 43 percent. It's still been losing value since then, the week after that devaluation took place. Undoubtedly, Ray, this impacts Zimbabweans and the businesses that are there, something they don't need. I mean, what has the impact been at this point? Well, for businesses, most of them are failing to restock because there's been a serious shortage of dollars. They're unable to access dollars on the official market because no one really is willing to sell their dollars, and central bank has been the only seller of dollars. So they haven't been able to get the dollars that they need to import and bring in goods to run their businesses. So they are failing to restock. Most of them as well are using a black market and turn to the parallel market basically to get that access to the dollars to be able to continue running their businesses. So there's been a dislocation in terms of how businesses are operating. They have got running costs, they have taxes to pay, but then they're not able to get that supply that they need for consumers as well. I mean, this just puts more price pressures because everything has been adjusted upwards to reflect the new current exchange rate. So it's banned inflation all over again, and their incomes as well have been slashed because of the devaluation. So we're seeing really some conversation as well taking place from the government saying that they are looking to review salaries for public servants to increase and match at least to what has taken place a week ago in terms of trying to cushion them from the devaluation.