‘ZiG stability recipe for wide acceptance’

Nqobile Bhebhe

Bulawayo Bureau

THE widespread usage of the new Zimbabwe Gold (ZIG) and its continued stability has the potential to trigger a seamless acceptance of the currency regionally and globally, Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee member, Mr Persistence Gwanyanya, has said.

The ZiG was introduced in April as part of a raft of policy interventions to address exchange rate volatility, curtail inflation, and restore macroeconomic stability.

It is backed by precious minerals, mainly gold and foreign currency.

Zimbabwe has 2,5 tonnes of gold and over US$300 million in cash reserves to back the new currency.

Of the gold reserves, 1,5 tonnes are held at the RBZ vaults and one tonne is held offshore.

Mr Gwanyanya told Business Chronicle in Bulawayo yesterday that although the monetary authorities’ primary focus was for massive local usage of ZiG, indications point to seamless acceptance regionally and internationally.

“We are more interested and concerned about how it is performing domestically before we talk about regional and international acceptance,” he said.

“When we have a wider acceptance of ZiG domestically, we will then talk about how ZiG is fairing regionally.

“We have not reached that point but there is hope that we will get there if the traction that we are currently witnessing continues.

“If it is accepted regionally, I think internationally, it won’t be over-ambitious for a seamless operation of ZiG in a short space of time,” said Mr Gwanyanya.

The new currency has already demonstrated solid gripping in the last three months with potential to anchor the economy, further stabilise prices and restore confidence in the local currency.

The recent International Monetary Fund (IMF) mission acknowledged the stability brought by the ZiG, which has positively affected retail and manufacturing sectors.

Several segments of the business sector are reporting increased consistency in pricing and a reduced need for frequent price adjustments due to historic currency fluctuations.

According to the Zimbabwe National Statistics Agency (ZimStat)’s latest update, the ZiG has made huge strides in taming inflation in the country as the month-on-month inflation rate for June 2024 dropped to the negative zone.

This means that prices as measured by the all-items ZiG Consumer Price Index (CPI) remained constant between May and June 2024.

Mr Gwanyanya said after a decade of Zimbabwe not having a functional currency, ZiG has renewed hope in the local currency.

“So far we have confidence with the traction on the ground with regards to the performance of ZiG.

“We have confidence because it appears the tendency of wanting to dispose of ZiG at every opportunity is waning away,” he said.

“When we have a wider acceptance of ZiG domestically, we will then talk about how ZiG is fairing regionally. We have not reached that point but there is hope that we will get there if the traction that we are witnessing continues.”

Mr Gwanyanya said there were very few internationally accepted and perfectly functional currencies, noting that the US dollar is popular as a reserve currency and therefore it is acceptable internationally unlike regional currencies.

“So far, there is hope that ZiG acceptance locally is going to continue widening and within a short space of time we expect that maybe the level of dollarisation will reduce to say 50 percent,” he said.