The Deputy Governor of the Reserve Bank of Zimbabwe, Innocent Matshe, states that the Zimbabwe Gold (ZiG) will remain supported without time limits as the central bank aims to boost trust in the currency before ending the multi-currency system in 2030.
The market has lately been shaken after the government revealed its intention to phase out the multi-currency system by 2030, with numerous voices criticizing this decision as hasty.
This occurs due to multiple instances of currency failures in Zimbabwe after they were introduced into the economic system amid periods of fluctuating exchange rates.
Earlier, following their return in June 2019, the Zimbabwean dollar (ZWL) was ultimately discontinued in April 2024 in favor of the ZiG, which is supported by gold and foreign exchange reserves.
The cause of its collapse was due to excessive inflation.
Nevertheless, no contemporary economy with significant dollarization has ever reverted to a state where the U.S. dollar completely vanishes.
Rather, effective examples decreased dependence on the dollar, without eliminating it completely, by rebuilding trust in the national currency, allowing salaries, taxes, savings, and majority of exchanges to revert back to local funds.
“We cannot remain competitive while using the US dollar. There are challenges such as the debt restriction, along with other regulatory and non-regulatory matters that require reform. These will be addressed,” Matshe stated at a Life Offices Association breakfast event in Harare on Friday.
The main point is whether you have authority over your own financial policies. To those in business who believe that the ZWL has been revived through ZiG, I would like to state that they are mistaken. They will remain incorrect, and this will not occur.
The ZiG will receive full support throughout its entire duration. The concept behind supporting the ZiG is to ensure that all fluctuations are grounded in underlying economic activities. Therefore, when productivity rises and the economy grows, changes will occur. You’ll notice this starting in July, as the ZiG begins to strengthen.
He mentioned that his confidence stemmed from the fact that economic entities were becoming more inclined to conduct transactions using ZiG or convert contracts into deals based on ZiG.
“Regrettably, the notion of revising the pact once more to establish trust and assurance, we stated, ‘well, that won’t work. You must wait. Once the agreement comes up for payment, it will be settled,’” Matshe mentioned.
Following the launch of the ZiG, the Central Bank has carefully managed monetary reserves to ensure that the money supply and liquidity consistently support stable prices and exchange rates. We have also observed early signs indicating that our exchange rate is beginning to diverge from inflation.
The director of the University of Zimbabwe Business School, Albert Makochekanwa, delivered a research paper entitled “Restoring Confidence in Long-term Savings After Hyperinflation: A Look at the Example of Zimbabwe,” which demonstrated how local currencies frequently lost substantial value.
As per the study, the nation’s past experience with elevated inflation has resulted in substantial depreciation of monetary savings and retirement contributions, with 85% of participants reporting they do not maintain long-term savings within banking institutions.
Makochekanwa gathered information from 3,200 participants spanning 10 provinces and discovered that just 15% of those surveyed maintain long-term savings in banks, whereas 74% participate in pension funds or programs.
This demonstrated that numerous individuals favored holding onto their funds beyond the official financial framework.
In order to regain trust in Zimbabwe’s monetary framework, Makochekanwa proposed extensive changes, such as enacting structural adjustments to enhance banking entities, and introducing an all-encompassing indemnity scheme for individuals who suffered loss of retirement funds or deposits because of extreme inflation, amongst other measures.
He highlighted the importance of openness and responsibility within financial organizations, such as reduced charges and expenses, improved client service, and more reliable performance assurances.
Supplied by SyndiGate Media Inc.
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