Zimbabwe Introduces ZIG Currency to Boost Confidence and Stability
Zimbabwe’s central bank has announced the introduction of a new currency called the Zimbabwean International Gold-backed (ZIG) currency. The move aims to restore confidence in the local currency and enhance stability in the country’s monetary system.
Governor of the Reserve Bank of Zimbabwe, Dr. John Mushayavanhu, unveiled the new currency while presenting his inaugural Monetary Policy Statement (MPS) in Harare.
In his statement, Governor Mushayavanhu highlighted the need for a sustainable and stable exchange rate, as well as the importance of rebuilding market confidence and policy credibility.
Optimism About New Currency
The Governor expressed optimism about the new currency, stating, “The new structured currency is anticipated to restore confidence in the local currency and safeguard the dual currency system which, to date, has served the country very well.”
He emphasised that the adoption of the ZIG currency would foster simplicity, credibility, certainty, and predictability in monetary and financial affairs.
The ZIG currency is backed by gold, and its introduction is part of the Reserve Bank’s efforts to anchor the growth trajectory of the Zimbabwean economy. Governor Mushayavanhu explained that the gold-backed digital tokens, measured in milligrams, aim to increase the divisibility and affordability of gold coins. The Reserve Bank has already processed 1,163 applications for the purchase of tokens valued at ZW$466.99 billion and US$5.0 million.
Change Issues
The Governor also addressed the recent challenges faced by retailers and consumers in obtaining change for foreign currency transactions. He acknowledged that the problem has led some retailers to resort to alternative methods such as using shop coupons or forcing customers to buy small items outside their shopping plans.
Governor Mushayavanhu assured the public that the introduction of the ZIG currency would alleviate these challenges, stating, “The increased role of the local currency will support and sustain the current macroeconomic stability and economic resilience.”
Furthermore, the Governor discussed the impact of recent global and domestic economic developments on Zimbabwe’s monetary and financial conditions. He highlighted the ongoing global funding squeeze, elevated global interest rates, and geopolitical factors, such as conflicts in Ukraine and Gaza, as factors affecting global economies, including Zimbabwe.
Alignment
Despite these challenges, the Governor stressed the country’s robust foreign currency generation capacity and its favourable balance of payments, which have supported improved foreign currency deposits in the banking sector.
In terms of interest rate policy, the Reserve Bank has reviewed its policy rate to align with inflation trends. The Bank policy rate has been reduced from 150% to 130% per annum due to the sustained decline in inflation.
Governor Mushayavanhu noted that high interest rates had helped curb speculative borrowing that was putting pressure on foreign currency reserves. To support economic growth, the Medium-Term Bank Accommodation (MBA) facility was introduced with relatively lower interest rates pegged at 75% per annum.
Tight Monetary Policy
In conclusion, Governor Mushayavanhu reiterated the Reserve Bank’s commitment to a tight monetary policy aimed at ensuring price and exchange rate stability. He called upon all stakeholders to observe good business ethics and pricing models to complement the Bank’s efforts.
The Governor expressed confidence in the ZIG currency, stating, “The Reserve Bank working in collaboration with the Government will continue to promote increased use of the local currency by 2030.”
The introduction of the ZIG currency marks a significant step in Zimbabwe’s monetary policy and is expected to have a positive impact on the country’s economic stability and growth prospects.
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