Online Reporter
Rutendo Nyeve-Victoria Falls Bureau
THE ZiG currency is now used in 43 percent of transactions, with the Reserve Bank of Zimbabwe confident that this growth will soon translate into long-term capital formation, enabling banks to mobilise funds for lending and support economic activity.
RBZ Deputy Governor Dr Innocent Matshe gave the latest progress of the ZiG while addressing delegates at the Zimbabwe Tripartite Negotiating Forum Global Summit underway in Victoria Falls.
The ZIG, a structured currency backed by a combination of foreign currency reserves, precious metals, particularly gold, and other valuable minerals, was introduced by the central bank in April 2024 as part of a broader strategy to restore stability to Zimbabwe’s monetary system.
It replaced the Zimbabwe dollar, which had been hammered by years of hyperinflation and repeated currency collapses.
The introduction of the ZIG was accompanied by stringent measures, including linking money supply growth to reserve backing, in a bid to rebuild public confidence in the local currency.
Since its introduction, the central bank has embarked on a countrywide awareness campaign aimed at encouraging the public and businesses to embrace the currency for everyday transactions.
The 43 percent uptake represents a significant milestone in that effort, though authorities acknowledge that deeper structural changes are still required for the currency to fully anchor the economy.
Dr Matshe was optimistic about the stability of the local currency, stating that sustained confidence-building measures have yielded positive results.
“I am confident that when you wake up tomorrow, the value of your currency won’t have changed. For this, we have done a countrywide campaign and we have seen that the use of ZIG transactions on all platforms has risen to about 43 percent. This is positive, but it’s yet to translate to being long-term capital,” he said.
Dr Matshe acknowledged that the transition would take time, saying banks are gradually moving from savings mobilisation to capital formation, a critical function that allows financial institutions to extend medium to long-term credit to productive sectors of the economy.
“We accept that, but these things take time. This will not happen overnight. In terms of why banks are not performing their traditional role in mobilising and then lending, I think, again, the explanation is time,” Dr Matshe said.
He noted a rise in non-convertible debentures as banks continue transitioning, adding that the loans-to-deposit ratio had recorded a marginal downtick of three to five percentage points.
A declining loans-to-deposit ratio typically indicates that banks are holding onto deposits rather than lending them out, a trend that can constrain economic growth if prolonged.
“We have seen non-convertible debentures on the rise because banks are not yet mobilising those and translating them into long-term or medium-term credit. But we think that it’s a steady transition of banks and other financial institutions moving from savings to capital formation,” he said.
Dr Matshe dismissed concerns over the current trend, describing it as expected in a transitional economy.
“Yes, there is an uptick or a downward trend in the loans-to-deposit ratio, but it’s between three to four, five percentage downtick. It’s expected in a transitional economy like ours. So, I’m not worried. The bank is not yet worried, and we think this will self-equalise and we will see an uptick.”
The ability of banks to convert deposits into long-term credit will be crucial in financing key sectors such as agriculture, mining and manufacturing, which require patient capital to expand capacity and create jobs.
dyton mupawaenda