Zimbabwe’s Central Bank Optimistic About Gold-Backed ZiG Currency Stability
The RBZ is confident in the stability of the Zimbabwe Gold (ZiG) currency, emphasizing robust monetary measures and a commitment to return to a mono-currency regime by 2030. RBZ Governor John Mushayavanhu highlighted the liberal pricing strategy, allowing businesses to set market-driven prices. The challenges of the USD-dominated regime and limited foreign currency availability are acknowledged as impediments to local economic competitiveness.
The Reserve Bank of Zimbabwe (RBZ) remains optimistic about the potential of the gold-backed Zimbabwe Gold (ZiG) currency to rival major currencies, such as the United States dollar. During a recent Tourism Business Council of Zimbabwe forum, RBZ Governor John Mushayavanhu defended the ZiG, asserting that robust monetary policies are sustaining its strength. He remarked, “The ZiG to USD rate is firming up,” indicating lasting confidence in the local currency as a core objective of the central bank.
Since its launch in April of the previous year, the ZiG was created to address ongoing issues of exchange rate instability and escalated inflation. RBZ has implemented a rigorous monetary policy established on high-interest rates to curb speculative borrowing and bolster the ZiG’s stability as a foundational element of the economy. Governor Mushayavanhu noted that the country is committed to achieving a mono-currency system by the target year of 2030, underlining the unsustainability of a USD-dominated currency regime.
Business leaders, alongside economists, recognize that the strength of the US dollar restricts the competitiveness of local goods and services globally. Limited access to US dollars also constrains the RBZ’s ability to leverage its monetary instruments for economic developments. To enhance market confidence, the RBZ has permitted economic agents to set prices irrespective of the official exchange rate.
Muhayavanhu explained that economic players can price their goods at rates reflecting market conditions rather than being bound to the RBZ’s established exchange rate, providing significant freedom in pricing strategies. He cautioned businesses using unsustainable pricing models that they risk pricing themselves out of the market. Meanwhile, certain fuel traders have approached the RBZ to offer fuel sales in ZiG, anticipating a shift towards domestic currency transactions.
The governor reiterated the commitment to avoid past issues such as fuel shortages, stressing that economic stability will inform policy decisions. Furthermore, he rejected proposals for preferential foreign exchange access for capital projects. RBZ Deputy Governor Innocent Matshe expressed that an exchange rate closely aligned with economic realities should approximate US$1/ZiG22, a level projected to be accepted by the market.
The RBZ’s confidence in the ZiG reflects a concerted effort to stabilize the economy by fostering a currency system favorable to local business operations. By promoting liberal pricing mechanisms and targeting a mono-currency framework, the bank aims to alleviate the challenges posed by the dominance of the US dollar. Continued vigilance and market adaptability will be essential to ensure lasting currency stability and economic growth in Zimbabwe.
Original Source: www.newzimbabwe.com
