By Business Reporter

The International Monetary Fund stated that Zimbabwe’s gold-backed ZiG currency, which it introduced in April and has since had to devalue, will not help the country’s economic problems.

In an interview, IMF Africa Department Director Abebe Selassie stated, “There is a tendency to see the market rate, the exchange rate, as the cause of the problems countries face.”

“In actuality, inflation tends to be the primary cause of exchange-rate weakness, with the exchange rate frequently serving as the symptom.”

Zimbabwe Gold, or ZiG for short, is the country in southern Africa’s sixth attempt to establish a stable local currency since 2009. Prior attempts were thwarted by rising inflation, which was fuelled by the government’s printing of money to fund spending.

With its support from gold and hard currency reserves as well as a central bank promise to avoid making the same mistakes twice, the ZiG was meant to regain public trust.

However, having been burned once, Zimbabweans are hesitant to put their trust in it. Although the ZiG’s street value is still significantly lower, authorities devalued it by 43% last month due to the unit is unofficial market value steadily declining.

According to the central bank’s website, the ZiG was quoted at 27.68 per dollar on the official market on Friday.

The unofficial rate ranges between 40 to 50 to the dollar, according to ZimPriceCheck.com. The primary currency used in everyday transactions is still the US dollar.

The devaluation contributed to the country’s earlier reported increase in monthly inflation, which rose from 5.8% to 37.2% in October.

“Unfortunately, Zimbabwe has experienced these different cycles, and the fundamental reason is a lack of trust in fiscal and monetary policy,” Selassie stated.

“The only way to close the gap that we could see is to address the underlying causes, which is something that goes right back to the drawing board.”