By Bloomberg News

The governor of the Reserve Bank of Zimbabwe (RBZ) has stated that the ZiG currency is undervalued by almost half, emphasizing that it is supported by foreign exchange reserves and gold, but acknowledging that market confidence remains fragile.

Bloomberg reported that RBZ boss John Mushayavanhu, said if all of the available international reserves were used to repurchase the currency in the market, it could be done at an exchange rate of around 15 per dollar, while the ZiG is currently trading at approximately 25-28 per dollar.

Mangudya however, acknowledged that the main challenge is restoring confidence among the public and businesses, following Zimbabwe’s past experiences of hyperinflation and currency failure.

While the central bank has managed to stabilize the currency and reduce inflation to single digits for the first time in almost 30 years over the past two years, restoring confidence will take time.

Currently, over 90% of domestic transactions still use the US dollar, reflecting a lack of public confidence in the local currency.

Meanwhile, inflation in March was 4.4%, a slight increase from 3.8% the previous month, but a significant drop from over 50% during the period the current governor took office.

The central bank kept interest rates at 35% to assess the impact of external factors. For example, the Iran-US conflict and rising energy and fertilizer prices, coupled with climate risks such as El Niño potentially causing drought later in the year, impacting agriculture and forcing increased food imports.

However, Zimbabwe still has international reserves of around $1.4 billion (including gold), which is considered sufficient to withstand pressure for some time.

Meanwhile, gold production increased by 8.3% in the first quarter, generating over $843 million in revenue, supporting the country’s financial position.

The governor expects inflation to remain in single digits throughout the year, despite external pressures, and projects economic growth of around 5%, down from 8% last year.

He also believes Zimbabwe should not rush into enacting the ZiG as a single currency by 2030 if it is not ready with key conditions in place.