The Reserve Bank of Zimbabwe is optimistic about the stability of the gold-backed ZiG currency, emphasizing measures to strengthen its value against the US dollar. Governor John Mushayavanhu highlights liberal pricing practices and aims to solidify the ZiG’s role in the economy, targeting a return to a mono-currency system by 2030. The RBZ is confident that market dynamics will lead to the acceptance of a realistic exchange rate.
The Reserve Bank of Zimbabwe (RBZ) is optimistic about the long-term stability of its gold-backed currency, the Zimbabwe Gold (ZiG), particularly against the US dollar. At a recent Tourism Business Council of Zimbabwe (TBCZ) event, RBZ Governor John Mushayavanhu advocated for the ZiG’s strength, noting policies in place to maintain its buoyancy: “The ZiG to USD rate is firming up.” This trend reflects a growing confidence in the local currency, underscoring the RBZ’s commitment to monetary stability.
Introduced in April 2022 amid inflation and exchange rate volatility, the ZiG represents a strategic move by Zimbabwe to stabilize its economy. The RBZ has implemented a tight monetary policy and high-interest rates to prevent speculative borrowing. The central bank aims for the ZiG to become an essential economic pillar while pursuing a 2030 target for re-establishing a domestic mono-currency system, moving away from the reliance on the US dollar.
Several experts, including business leaders, acknowledge the unsustainability of a dollar-denominated economy, citing that it hinders the competitiveness of local products internationally. The limited US dollar supply restricts the RBZ’s ability to effectively employ monetary policies. To foster confidence in the ZiG, the bank allows businesses to set prices using any market-driven exchange rate instead of strictly adhering to the official rate, thus promoting a more liberal pricing system.
Mushayavanhu remarked that the Financial Intelligence Unit (FIU) would not penalize enterprises for setting prices based on flexibility, provided they ensure reasonable profit margins. He warned that firms attempting to game the system with unrealistic exchange rates would undermine their competitiveness. The RBZ has also noted interest from fuel traders in adopting the ZiG for transactions, indicating a shift toward local currency use in essential industries.
Mushayavanhu further dispelled calls for preferential forex access for major capital projects, advocating for a realistic exchange rate that balances economic fundamentals at approximately US$1 to ZiG22, which authorities anticipate the market will accept.
The RBZ is confident in the gold-backed ZiG currency’s ability to stabilize Zimbabwe’s economy and reduce reliance on the US dollar. Policies promoting a flexible pricing system and monetary discipline aim to enhance local currency confidence. Additionally, initiatives for on-ground adoption of the ZiG in essential sectors, like fuel trading, further support this currency’s future viability. Overall, the strategy reflects a broader vision for a sustainable economic framework by 2030.
Original Source: www.newzimbabwe.com
