A MEMBER of the Reserve Bank of Zimbabwe (RBZ)’s monetary policy committee has said universal acceptance of Zimbabwean Gold (ZiG) will help the country de-dollarise.
Persistence Gwanyanya, a leading economist, said in an interview on the side-lines of CEO Africa Roundtable annual conference last week, ZiG was part of the country’s strategy towards attaining a mono-currency system by 2025.
The central bank recently availed the gold-backed digital currency for domestic transactions to deal with increasing dollarisation levels.
President Emmerson Mnangagwa announced at the same event government would press ahead with its plan to end dollarisation in 2025.
However, the US dollar currently dominates transactions, with 80% of transactions taking place in the greenback.
“We recently introduced ZiG, which has a purpose of value presentation,” he said. “If this ZiG is universally accepted (it will) reduce pressure on the US dollar and reduce dollarisation levels in the economy. That is going to benefit the economy in a big way. I believe that inflation will never go beyond three digit figures.”
In August, Zimbabwe’s industries pushed government to defer trade in multiple currencies until 2030, giving authorities room to build a foundation to defend the country’s fragile unit.
The Zimbabwe dollar has tumbled by wide margins on the black market this year, sending waves of shocks across a market that had been frustrated by a brutal bloodbath mid-year.
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Upheavals on the currency front have given impetus to industries’ view that exclusive trade in the Zimbabwe dollar must not begin as planned in 2025.
The heads of the Zimbabwe National Chamber of Commerce (ZNCC) and Tourism Business Council of Zimbabwe (TBCZ) said factors like high inflation and weak foreign currency reserves must be tackled before Harare ends dollarisation.
They spoke as peers at the Confederation of Zimbabwe Industries (CZI) and CEO Africa Roundtable (CEO ART) warned during a high profile meeting with Industry and Commerce minister Sithembiso Nyoni that the country risked slipping into meltdowns if government defied market forces and acted prematurely.
According to a 2017 RBZ monetary policy, key fundamentals to be tackled also include tying down inflation within the single digit territory and addressing trade imbalances.
“There are already a lot of corporate tombstones as a result of controls in Zimbabwe,” Christopher Mugaga, chief executive officer at ZNCC told the Zimbabwe Independent.
“A currency is as good as the underlying economy, which inspires it. But for now, fundamentals are pointing to a market that is not yet 100% ready for a Zimbabwe dollar. We must satisfy conditions, the required fundamentals first and we need to respect market forces.”
The country has been under a multiple currency regime since 2009 when authorities capitulated and took respite in the US dollar after the Zimbabwean unit crushed under 500 billion percent inflation in 2008.
Wengayi Nhau, president of the TBCZ, agreed that dealing with fundamentals would be crucial in frustrating unforeseen headwinds as Zimbabwe swings towards its own currency.
But he said a strong US dollar would continue hammering industrial exports and service sectors like tourism.