ZiG stability assured, authorities dismiss payout fears as $1.2bn reserves back currency

MONETARY Policy Committee Member, Dr Persistence Gwanyanya has moved to allay fears of growing market anxiety that Government’s plan to pay local suppliers and creditors in Zimbabwe Gold (ZiG) could trigger a collapse in the local currency saying the country’s foreign currency reserves stand as an impregnable shield.

This comes as the Reserve Bank of Zimbabwe (RBZ) released new ZiG notes into the market yesterday.

Speaking in Victoria Falls recently, Dr Gwanyanya acknowledged the structural challenges of the multi-currency regime but declared that there is no real fear of driving the market out of control from the Government’s payment measures.

His reassurance comes as a critical counterweight to public jitters that a sudden injection of ZiG to clear arrears would stoke inflation and send the currency into a tailspin.

Dr Gwanyanya anchored his confidence on hard numbers, revealing that the RBZ’s war chest is more than adequate to absorb every ZiG in circulation.

“The total ZG is about 20 billion Zimbabwe dollars in the whole economy, which calculates to around US$770 million against our reserves of US$1.2 billion

“What that means is, even if we are to pay everything in ZiG in this economy, the monetary authorities have the capacity to buy every ZiG in the economy, which guarantees stability,” he said.

He further clarified by focusing on reserve money, the most liquid portion of the currency which stands at about 5.3 billion ZiG, roughly US$200 million.

“So you can agree with me that there is no fear,” he said.

Dr Gwanyanya dismissed the assumption that Government would flood the market with ZiG.

He explained that current fiscal realities sharply limit the scope of supplier payouts.

“Currently our Government is collecting 30 percent of revenues in ZiG. Out of that 30 percent, 20 percent is devoted towards employment costs, which leaves government with only 10 percent to meet the suppliers and creditors’ demands,” he said.

From that slender 10 percent, he argued that it is very difficult for government to pay all contractors and suppliers in the local currency.

He said the policy is an administrative signal to encourage use of ZiG across the economy, not a reckless spigot.

He reaffirmed that Treasury has no access to central bank financing which he said kills the ghost of past hyperinflation.

“The payments that are coming from Government are payments that are coming from the budget, and these payments are not coming from the creation of money by banks or creation of money by Government

“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.

To further stabilise the ZiG, Dr Gwanyanya said there are deliberate demand-side policies in place.

He recalled that in the last quarter of 2024, authorities required corporate taxes to be paid 50 percent in local currency.

A standard pricing list for procurement has also been introduced to ensure value for money, eliminating the arbitrage incentive that drives people to parallel markets.

“You do not have the latitude or incentive to exchange the money in the alternative market because you are now being paid in line with price guidelines which does not afford you that luxury,” he said.

Instead, those holding ZiG can access foreign currency through the interbank market, backed by the central bank’s assurance of sufficient reserves.

Acknowledging that there are outstanding creditors from previous periods, Dr Gwanyanya said Government has crafted a five-year programme to address them, coached around the capacity of Government around the budget.
“Really, we see the stability continuing into the future,” he said.