THE Zimbabwe Gold (ZiG) notes and coins debuted on Tuesday to quench the thirst of a market that had been virtually turned into a dollarised environment after the rejection of the Zimdollar before its expiry date.
The Zimdollar was being used as change in the informal sector and by commuter omnibuses.
It had been a long wait for the public that was forced to pay US$1 as transport fare which would normally be US$0,50.
ZiG, which is backed by gold and foreign currency reserves, is expected to stabilise prices through maintaining one of its key functions — store of value.
The structured currency is part of measures by the central bank to achieve the twin objectives of exchange rate stability and the use of the local currency as a medium of exchange.
Since the unveiling of the new measures by Reserve Bank of Zimbabwe (RBZ) governor John Mushayavanhu, there has been consensus to give monetary authorities a chance in the hope that they would take the economy to the Promised Land of exchange rate stability and where the local currency holds sway.
It is expected RBZ will stay the course with the tight monetary policy measures to attain exchange rate stability and ensure the increased use of the local currency. About 85% of local transactions are conducted in United States dollars. Mushayavanhu has set a target of 30% of transactions being carried out in local currency by year end. The ratio is expected to improve to 60:40 by the end of 2025.
The bank’s Monetary Policy Committee (MPC) this week said RBZ should contain money supply growth at tenable levels determined by targeted inflation, growth of the economy and an increase in foreign reserves backing the ZiG currency.
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It said the RBZ must continue working with government to ensure a robust liquidity management system through the joint Liquidity Management Committee. The committee is made up of RBZ and Treasury staff to ensure proper sequencing and sterilisation mechanisms to maintain monetary stability.
RBZ, the MPC said, must work to ensure the creation of effective demand for the domestic currency through strict adherence to the multi-currency system by all players in the economy except for exempted services.
It urged the bank to work closely with government to encourage the increased use of ZiG for payment of goods and services to public entities including the settling of tax obligations on quarterly payment dates (QPDs)
Mushayavanhu previously stated that the demand for ZiG will rise in June as companies battle to look for local currency to settle half of their QPDs in ZiG.
RBZ was also directed to ensure that any growth in reserve money is fully covered by reserves, in the form of gold, other precious minerals and foreign currency balances in the central bank’s nostro account.
The MPC also directed RBZ to make sure that there is effective communication on the new structured currency.
When it comes to communication, the bank has been found wanting, tripping over itself with mixed messages to the market, dampening the public’s confidence in ZiG especially when Mushayavanhu said the structured currency was not of his own creation.
The bank was also forced to revise its roll out date of the notes and coins after it had jumped the gun. Such small housekeeping issues must be minimised to build confidence in ZiG.
