The Reserve Bank of Zimbabwe is optimistic about the stability of the gold-backed ZiG currency, citing strong monetary policies. Governor Mushayavanhu discussed the need for a shift from the US dollar to enhance local competitiveness, allowing flexible exchange rates for businesses. RBZ aims to establish a stable economic environment by 2030, transitioning towards a mono-currency framework.
The Reserve Bank of Zimbabwe (RBZ) remains optimistic about the long-term stability of the gold-backed Zimbabwe Gold (ZiG) currency despite external challenges. Governor John Mushayavanhu defended the currency during a recent Tourism Business Council meeting, asserting that strong monetary policies are helping the ZiG compete with major currencies like the United States dollar. “The ZiG to USD rate is firming up,” stated Mushayavanhu, highlighting confidence in the local currency as a priority for the bank.
Introduced in April of the previous year, the ZiG was a response to severe exchange rate volatility and inflation. The RBZ has implemented a tight monetary policy, supported by high-interest rates, to discourage speculative borrowing. Mushayavanhu emphasized that ensuring stability in the ZiG is crucial, with plans for it to serve as the foundation of Zimbabwe’s economy. The goal is to achieve a domestic mono-currency system by 2030.
Experts agree that the current reliance on the US dollar is not viable due to its overpowering strength, which hampers local products’ competitiveness. Additionally, the limited availability of US dollars constrains the central bank’s ability to adjust economic policies effectively. To boost confidence in the ZiG, the RBZ allows businesses to set prices based on market-driven exchange rates rather than being bound to the official RBZ rate, which enhances pricing flexibility.
Mushayavanhu reassured that the Financial Intelligence Unit will not penalize companies for adopting market-based pricing, as long as profit margins remain reasonable. He cautioned that businesses using unrealistic rates may risk losing market position. Furthermore, he noted that certain fuel traders are now offering to sell fuel in ZiG to fulfill local obligations, indicating a shift towards using local currency.
Mushayavanhu expressed a commitment to avoiding past issues of fuel shortages and long queues, prioritizing economic stability in policy decisions. Deputy Governor Innocent Matshe suggested a realistic exchange rate of US$1/ZiG22, which they hope will gain acceptance in the market.
In summary, the Reserve Bank of Zimbabwe holds a positive outlook on the stability of the ZiG currency through strong monetary policies and market-responsive pricing. This initiative aims to enhance the local economy by shifting away from reliance on the US dollar, promoting the ZiG as a viable alternative. The bank’s efforts reflect a strategic approach towards achieving long-term economic stability and growth.
Original Source: www.newzimbabwe.com
