ZiG stability assured as $1.2bn reserves back currency

THE Reserve Bank of Zimbabwe has allayed growing market fears that Government’s plan to pay local suppliers and creditors in Zimbabwe Gold (ZiG) could trigger a collapse of the local currency, with monetary authorities insisting that foreign currency reserves stand at an impregnable US$1.2 billion.

Monetary Policy Committee member Dr Persistence Gwanyanya dismissed public concerns that a sudden injection of ZiG to clear arrears would stoke inflation and send the currency into a tailspin.

This comes after the RBZ released new ZiG notes into circulation on Tuesday.
Speaking in Victoria Falls recently, Dr Gwanyanya anchored his confidence on hard numbers, revealing that the central bank’s war chest is more than adequate to absorb every ZiG in circulation.

“The total ZiG is about 20 billion in the whole economy, which calculates to around US$770 million against our reserves of US$1.2 billion,” he said.

“Even if we are to pay everything in ZiG in this economy, the monetary authorities have the capacity to buy every ZiG, which guarantees stability.”

Dr Gwanyanya further clarified that reserve money which is the most liquid portion of the currency stands at about 5.3 billion ZiG, roughly US$200 million.

He also dismissed assumptions that Government would flood the market with ZiG, explaining that current fiscal realities sharply limit supplier payouts.

He said Government collects 30 percent of revenues in ZiG.
Of that, 20 percent goes towards employment costs, leaving only 10 percent to meet suppliers’ and creditors’ demands.

Dr Gwanyanya reaffirmed that Treasury has no access to central bank financing, killing the ghost of past hyperinflation.

“Government is working within a budget deficit level of 0.3 percent, and they have no recourse to the monetary authorities. There is no fear of monetisation of that budget,” he said.

For outstanding creditors from previous periods, Government has crafted a five-year programme to address them within

budget capacity.
“We see the stability continuing into the future,” Dr Gwanyanya said.