Zimbabwe’s Central Bank confident of gold-backed ZiG currency’s long-term stability
Mon Mar 10 2025
THE Reserve Bank of Zimbabwe (RBZ) is still pinning its hopes on the strength of the local gold-backed Zimbabwe Gold (ZiG) currency to compete against major currencies, including the United States dollar.
Speaking during a Tourism Business Council of Zimbabwe (TBCZ) indaba recently, RBZ Governor John Mushayavanhu put up a spirited defence against detractors of the ZiG claiming robust monetary policy measures introduced by the bank were ensuring the ZiG remains bouyant.
“The ZiG to USD rate is firming up,” Mushayavanhu said. The governor claimed this as a clear indication that confidence in the local currency remains the primary mandate of the apex bank.
Zimbabwe introduced the currency in April last year after a whirlwind battle with exchange rate volatility and runaway inflation.
Part of the raft of measures adopted by RBZ is the tight monetary policy stance, scaffolded by a relatively high-interest rate regime to discourage speculative borrowing.
The RBZ governor said the central bank was working to ensure durable ZiG stability and to make the currency the pillar of the economy.
Mushayavanhu highlighted that de-dollarisation remained on track to meet the 2030 target of returning to a domestic mono-currency regime.
Authorities, business leaders and economists admit that the US dollar-denominated currency regime is not sustainable, given the overly strong currency, which suppresses the competitiveness of local goods and services on the global market.
The limited supply of US dollars also limits the central bank’s capacity to use its monetary policy tools to influence economic dynamics in the country.
Among the measures to enhance confidence and performance of the ZiG, the apex bank said economic agents were free to charge prices not fixed to the official exchange rate.
“The market is free to price their goods and services at whatever USD to ZiG rate they prefer without being limited to using the official RBZ exchange rate,” Mushayavanhu told delegates.
This effectively means the pricing system is liberal, allowing companies to use exchange rates that reflect market dynamics.
The governor noted that the Financial Intelligence Unit (FIU) would not penalise businesses for not using pricing models fixed to the official exchange rate, for as long as the pricing is with reasonable margins.
Mushayavanhu emphasised that economic agents attempting to manipulate the market by using untenable exchange rates would soon price themselves out of competition.
The governor revealed that some fuel traders had already approached the RBZ, offering to sell fuel in ZiG to finance their local obligations.
Over time, the governor said, the fuel dealers would voluntarily sell the commodity in the domestic currency.
“We do not want to go back to long queues and fuel shortages,” he noted, signalling that policy decisions will be made with economic stability in mind.
Mushayavanhu also shot down suggestions for preferential treatment to forex access for capital projects.
RBZ Deputy Governor Innocent Matshe said the realistic exchange rate, based on economic fundamentals, should be US$1/ZiG22, a level that authorities expect the market to accept.
Source: https://www.newzimbabwe.com/