The RBZ remains confident in the gold-backed Zimbabwe Gold (ZiG) currency, believing it can compete with major currencies like the USD. RBZ Governor Mushayavanhu highlights the importance of maintaining market confidence and adopting robust monetary policies to ensure the currency’s success. The bank is also allowing flexible pricing to better reflect market dynamics, while aiming for de-dollarization by 2030.
The Reserve Bank of Zimbabwe (RBZ) continues to express confidence in the long-term stability of the gold-backed Zimbabwe Gold (ZiG) currency amidst ongoing challenges from more dominant currencies like the United States dollar. RBZ Governor John Mushayavanhu recently defended the viability of the ZiG during a Tourism Business Council of Zimbabwe (TBCZ) indaba, asserting that the implementation of robust monetary policies is crucial for maintaining the currency’s resilience against fluctuations.
Governor Mushayavanhu asserted that the strengthening rate of the ZiG against the USD is indicative of increasing trust in this local currency. He emphasized that the preservation of confidence in the ZiG is one of the primary objectives of the central bank, which introduced the currency in April last year to counteract exchange rate volatility and rampant inflation.
Part of the strategies employed by the RBZ includes a stringent monetary policy supported by high-interest rates aimed at discouraging speculative borrowing. The governor stated that efforts are underway to ensure the durability of the ZiG, positioning it as a foundational element of the economy, and highlighted the ongoing de-dollarization goal set for 2030, aiming to transition back to a mono-currency framework.
Various stakeholders, including authorities and economists, recognize that reliance on the US dollar is unsustainable, as its strength diminishes the competitiveness of local products in the global marketplace. The limited availability of US dollars also restricts the RBZ’s capacity to effectively implement monetary policy to guide economic activities in Zimbabwe.
To bolster the confidence in the ZiG, the RBZ has permitted economic agents to determine prices freely without being constrained by the official exchange rate. This liberalization allows businesses to set prices for their goods and services according to a rate that better reflects market realities, as Governor Mushayavanhu explained. The Financial Intelligence Unit (FIU) will not impose penalties for adopting these market-driven pricing strategies provided they remain reasonable.
The governor also noted that businesses engaging in manipulative pricing based on unrealistic exchange rates would risk losing competitive standing. Furthermore, some fuel suppliers are reportedly seeking to transact in ZiG to fulfill local obligations, reflecting a growing trend towards utilizing the domestic currency. The governor reiterated the importance of economic stability in policymaking, advocating against a return to shortages and long queues for essential commodities.
Mashayavanhu rejected calls for preferential forex access for capital projects while RBZ Deputy Governor Innocent Matshe communicated that the realistic exchange rate, reflecting economic fundamentals, should stand at US$1 to ZiG22, a benchmark they anticipate will gain market acceptance.
In summary, the Reserve Bank of Zimbabwe’s unwavering belief in the ZiG currency is grounded in its strategic monetary policies aimed at fostering economic stability. By allowing market-driven pricing and discouraging speculative practices, the RBZ seeks to enhance confidence in the ZiG, addressing the challenges posed by reliance on the US dollar. The long-term plan focuses on achieving a robust domestic currency environment while gradually moving toward a mono-currency system by 2030.
Original Source: www.newzimbabwe.com
