Zimbabwe’s Central Bank Optimistic About the Stability of Gold-Backed ZiG Currency

The Reserve Bank of Zimbabwe expresses confidence in the gold-backed ZiG currency’s ability to compete with major currencies, particularly the US dollar. RBZ Governor John Mushayavanhu highlighted recent robust performance metrics as evidence of increased confidence. The bank’s policies focus on reducing reliance on foreign currencies and stabilizing the local economy by implementing a liberal pricing system and high-interest rates to curb speculation.

The Reserve Bank of Zimbabwe (RBZ) remains optimistic about the stability of the gold-backed Zimbabwe Gold (ZiG) currency in its quest to compete with major currencies, notably the United States dollar. During a recent Tourism Business Council of Zimbabwe (TBCZ) gathering, RBZ Governor John Mushayavanhu advocated strongly for the currency, citing effective monetary policy measures ensuring its buoyancy. “The ZiG to USD rate is firming up,” emphasized Mushayavanhu, indicating that confidence in the local currency is a paramount focus of the central bank.

Introduced in April of the previous year, the ZiG currency was established to combat exchange rate volatility and rampant inflation. The RBZ has adopted a series of policy measures, including a stringent monetary policy coupled with high interest rates, to deter speculative borrowing. The governor affirmed the central bank’s commitment to establishing the ZiG as a keystone of the economy and confirmed that the objective of de-dollarisation remains on target for the 2030 goal of reinstating a domestic mono-currency regime.

Various stakeholders, including authorities and business leaders, recognize the unsustainability of the current US dollar-based currency regime, which hampers the competitiveness of local goods globally. Additionally, the scarcity of US dollars limits the RBZ’s capacity to effectively utilize its monetary policy. To bolster confidence in the ZiG’s performance, the RBZ has implemented a liberalized pricing strategy where economic agents can set prices detached from the official exchange rate. “The market is free to price their goods and services at whatever USD to ZiG rate they prefer,” stated Mushayavanhu.

The RBZ has incentivized companies to price based on market dynamics rather than being tethered to official rates. The Financial Intelligence Unit (FIU) will not penalize businesses that adopt flexible pricing strategies as long as they maintain reasonable margins. The RBZ governor articulated that market manipulations with unsustainable exchange rates would lead to a loss of competitiveness for offending economic agents. Furthermore, some fuel traders have approached the RBZ with proposals to sell fuel in ZiG to fulfill local obligations, which could gradually lead to domestic currency transactions.

Mushayavanhu additionally rejected proposals for favoritism towards forex access for capital projects. RBZ Deputy Governor Innocent Matshe articulated a realistic expectation for the exchange rate, positing the value at US$1/ZiG22 based on fundamental economic indications, anticipating that this level will be embraced by the market.

In summary, the Reserve Bank of Zimbabwe asserts that the gold-backed ZiG currency will maintain its stability and support the nation’s economy. The bank’s multi-faceted approach, including liberalized pricing and a firm stance against speculative borrowing, aims to restore confidence in the local currency. By emphasizing the necessity to transition away from reliance on the US dollar, both the RBZ and economic leaders acknowledge the importance of ensuring that the ZiG becomes a robust pillar of Zimbabwe’s economic landscape.

Original Source: www.newzimbabwe.com