Chronicle EditorLeonard Ncube, [email protected]
PRIVATE sector leaders and the Reserve Bank of Zimbabwe (RBZ) have expressed satisfaction with the positive performance of the country’s structured currency, the Zimbabwe Gold (ZiG), and its continued stability leading to improved price predictability while taming inflationary pressures.
Global financial institutions including the African Development Bank (AfDB) have also commended the Government for introducing the ZiG, backed by precious minerals mainly gold, and a basket of foreign currency reserves.
Nearly three months after its formal adoption, the ZiG has defied the odds as it has effectively tamed exchange rate volatility amid widespread embracement by diverse market players.
Speaking at the Zimbabwe National Chamber of Commerce (ZNCC) 2024 congress in Victoria Falls, representatives from the Government, Central Bank, and private sector said they were charmed by the positive ZiG impact on the overall economy and urged all Zimbabweans to have confidence in the local unit.
The presenters were speaking during a panel discussion to review the structured currency framework, giving perspectives and recommendations on what is needed going forward.
Dr Steven Moyo, an economist from the Central Bank, who was representing Deputy Governor Dr Innocent Matshe, said RBZ will continue to set robust liquidity measures and other strategies to make the ZiG widely acceptable.
“The main message we are getting from those outreaches is that people are saying they are embracing the structured currency. We remain open to refine the measures so that the currency is stable and works on robust liquidity management,” he said.
“We have set targets so that liquidity should not exceed certain targets as we are also maintaining a tight monitory stance.
“To boost demand for ZiG, the Government is supporting the banks to make sure Government departments accept ZiG for payments. To curb illicit transactions relevant agencies are working flat out to make sure there is no abuse of the financial system.”
Dr Moyo said the Central Bank was now focused on solving the challenge of change and called upon all Zimbabweans to embrace using their currency saying this comes with a lot of advantages.
He said the Central Bank will walk its talk with regards to containing the money supply and that the ZiG will be issued in tandem with the reserves generated.
“Government and the bank are committed to ensuring that ZiG is stabilised and we are working towards that. The ZiG currency has shown stability since its introduction, which has also been reflected in price developments in the country,” said Dr Moyo.
“The parallel market activity has been effectively contained with lower premiums on isolated cases of subdued parallel market activities.
“There has been some stability in the market ever since we introduced the structured currency. It is our goal to ensure that the local currency is the preferred currency for domestic transactions and the United States dollar for foreign transactions.”
Dr Moyo said certainty and predictability will allow long-term planning and investment, which is key for industrialisation.
“Once we have stability, we will attract domestic capital and FDI and also supports competitiveness of Zimbabwe. The bank has been taking robust liquidity management and we have not exceeded the target that we have set for excess liquidity, which should be below the optimum of US$166 million ZiG equivalent,” he said.
Dr Moyo said April 2024 has become the base year after the introduction of ZiG with annual inflation for May dropping to minus 2,4 percent as the first inflation out-turn for ZiG shows disinflation, which is evidence of price corrections in the country.
“The public has embraced ZiG and it is actually our goal to ensure that the local currency is the preferred currency. Increased use of local currency will be critical to anchor competitiveness, industrialisation and trade,” he added.
Special advisor to the Ministry of Finance, Economic Development and Investment Promotion, Professor Ashok Chakravarti, said Zimbabwe’s fundamental problem in the last years was the growth of money supply, which had been out of control and caused inflation and exchange rate to depreciate.
He said there is need to create confidence on ZiG over time as the current policies are different from the past, which were “only statements” but said now mechanisms have been put in place to limit the money supply.
“There have been some legacy issues with money supply and that led to the structured currency. We were not printing money for the fun of it, we had a situation where the Second Republic inherited a lot of debt from AfreximBank and other creditors worth several billions of dollars and was being serviced by the Central Bank.
“To service that debt, the Central Bank was printing money and that was the primary cause of increasing money supply and primary cause of inflation and that continued into the first quarter of this year resulting in the inflation rate of around 700 percent,” he said.
“Since the structured currency was introduced, we have had stable inflation and that story is over as there was no reason anymore to print more money.”
Prof Chakravarti said the stability being enjoyed now was not fictitious as the key issues have been dealt with through the structured currency with the Government gradually moving away from the dual currency.
AfDB principal country economist, Mr Kelvin Banda said the continental financial institution supports the ZiG.
“As AfDB Zimbabwe, we welcome the introduction of ZiG. It was necessary for the Government to take action after the situation last year and from our perspective the decision was taken and today, we can stand for that and say the currency is stable and inflation has gone down,” he said. “So, this is a plus we take forward as African Development Bank and what’s needed is building confidence around the ZiG.”
ZNCC’s outgoing president, Mr Mike Kamungeremu, said so far the Central Bank and Government had fulfilled promises not to print more money and urged them to consult before issuing any new measures that could surprise the market.
“So far so good as the governor has stuck to his promises. We promised the governor that we were going to our members as we have always advocated evidence-based approaches and people have accepted ZiG. The structured currency is so far so good and it is stable,” he said.
The congress was expected to end last night with an awards ceremony.—@ncubeleon
Online Reporter