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Debra Matabvu
PRICES of goods and services are expected to remain stable, as cash and mineral reserves backing the new currency, Zimbabwe Gold (ZiG), have risen from US$285 million to approximately US$370 million over the past three months, which provides a strong buffer against external forces, The Sunday Mail has learnt.
In an interview, Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mushayavanhu said the central bank has been “walking the talk in ensuring that ZiG is fully backed at each point in time”.
“As such, the Reserve Bank has been accumulating reserves from royalties of gold and conversion of in-kind royalties of other precious minerals such as diamonds, lithium and platinum to gold reserves.
“As a result, the total reserves have progressively increased by about 30 percent, from US$285 million as at April 5, 2024 to above US$370 million as at end of June 2024.”
ZiG is a structured currency backed by a reserve of foreign currency and precious metals, primarily gold, held by the central bank.
Gold deliveries to Fidelity Gold Refinery recovered significantly during the second quarter of the year following the withdrawal of a 15 percent value-added tax on gold deliveries.
The tax had affected deliveries by small-scale miners, who account for the bulk of Zimbabwe’s production.
The small-scale miners delivered 4,5 tonnes (t) of gold during the April to June period, up from 2,9t realised from January to March.
It is believed the continued increase in reserves will provide a strong buffer for ZiG, especially against exchange rate volatility, and build the import cover needed to provide a platform for a sustainable currency.
Overall, sustainable stability could bolster public confidence in the new unit, which is crucial for its long-term success.
Dr Mushayavanhu said the RBZ had released adequate liquidity into the market.
“Regarding ZiG issuances to the market, the Reserve Bank has, so far, distributed optimal ZiG notes and coins, in line with cash orders from banks,” he said.
“In addition, to ensure that cash reaches all the cash hotspots, the Reserve Bank, effective June 10, 2024, introduced the swipe facility for ZiG at Homelink (Pvt) Ltd and cash kiosks at bus termini to increase access to cash, especially
small denominations for the commuting public.
“Homelink has opened easy-to-access kiosks at high-concentration centres such as Copacabana, Charge Office and Market Square and they continue to roll out these kiosks to other places outside Harare.”
The new currency, he added, had performed “exceptionally well” since its introduction on April 5.
“Concerning the performance of ZiG in the past three months, I am happy to say that the new structured currency has lived up to expectations and has performed exceptionally well.
“As a structured currency, the expectation is that the ZiG exchange rate should mimic the developments in the price of assets backing it, which include the price of gold and other precious minerals, and inflation differentials between the US dollar and ZiG inflation.
“The Reserve Bank remains committed to maintain the full backing of the new currency and engender desirable conditions for currency and exchange rate stability in the macro-economy.”
Stability
The ZiG exchange rate has been stable over the last three months, trading at between ZiG13,2 and ZiG13,7 per US$1.
“As a result, inflation pressures have been subdued, with month-on-month realised inflation at -2,4 percent in May and levelling at zero percent in June 2024,” he said.
“The acceptance of ZiG internationally will depend on its stability and predictability.
“As a result of increased stability, ZiG can start to be accepted in our neighbouring countries (especially around the borders) in the same way the Botswana pula and South Africa rand are accepted in the border towns of Zimbabwe.”
The International Monetary Fund (IMF) also indicated, after its recent Article IV Mission to Zimbabwe, that the country had succeeded in ending “a bout of macroeconomic instability in the first three months of the year”.
“Against this background, the Reserve Bank of Zimbabwe (RBZ) introduced in April 2024 a new currency — the Zimbabwe Gold. The ZiG official exchange rate has so far remained stable, ending a bout of macroeconomic instability in the first three months of the year (when the Zimbabwe dollar depreciated by about 260 percent). Assuming that macro-stabilisation is sustained, cumulative inflation in the remainder of the year is projected at about 7 percent,” said the IMF in a statement.
“The mission welcomes improvement in monetary policy discipline and recommends further refinements to the policy framework. Price stability would be best achieved by stabilising the ZiG nominal exchange rate against a suitable basket of currencies (accounting for the dominant role of the USD in the economy).”
On Thursday, President Mnangagwa said the Government was working on a programme to gradually de-dollarise the economy following the introduction of ZiG.
Speaking after commissioning a fruit juice and water processing plant in Mutare, the President said: “In two years; in fact, two years is too far off . . . but there will come a time when our ZiG currency has fully penetrated the market, then I will give a directive that the country will be using the ZiG only.
“If you go to the shops to buy with the US dollar, they will refuse it.
“Even those who were performing and entertaining us today, who were being given US dollar tokens, in two months’ time, you will be given the ZiG and no US dollars because that is our currency . . .”
The World Bank has since assigned an international currency code to ZiG, which shall be represented as ZWG with 924 being the numeric.
The new currency code and numeric code replace the previous ZWL and 932 codes, respectively.
“The assignment of the international currency code is an international standard that is done for all the countries and provides for unique identification in international foreign exchange, banking, payments and other systems,” added Dr Mushayavanhu.
“It should be noted that the new currency notes and coins will continue to be referenced or named ZiG.”
Online Reporter