SHELMA SIBANDA
In a bid to address the challenges posed by inflation and promote currency stability, the Reserve Bank of Zimbabwe has introduced a new currency called ZIG. The move aims to restore confidence in the local currency and ensure the sustainability of the multi-currency 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.
“The new structured currency is anticipated to restore confidence in the local currency and hence safeguard the dual currency system which, to date, has served the country very well,” said Dr. Mushayavanhu.
The introduction of ZIG comes at a time when the Zimbabwean economy is experiencing growth within an inflationary environment. The volatility in the exchange rate and inflation has undermined the predictability, convertibility, and reliability of the local currency under the multi-currency system.
To address the challenges faced by retailers and consumers regarding change for foreign currency transactions, the Reserve Bank has taken decisive steps.
Dr. Mushayavanhu acknowledged the issue, stating, “This challenge has compelled some retailers to devise ways of circumventing the problem, including resorting to either using shop coupons or forcing consumers to buy small items such as sweets, chocolates, and pens outside their shopping plans.”
The introduction of ZIG aims to provide a more convenient and practical solution for transactions, as the current Zimbabwe dollar banknotes have become insufficient given the prevailing price levels in the economy.
Dr Mushayavanhu said that the Reserve Bank’s decision to recalibrate its monetary policy framework aligns with its priority of supporting the economy’s growth prospects while restoring stability, convertibility, and transactional convenience of the local currency. The bank aims to anchor the growth trajectory of the economy and enhance domestic foreign exchange resource mobilisation in the context of the global funding squeeze.
The Governor emphasised the importance of a stable and sustainable exchange rate in fostering market confidence and policy credibility.
“The Reserve Bank also remains committed to pursuing a tight monetary policy to guarantee price and exchange rate stability which are the key ingredients necessary to sustain the desired optimal currency mix in the economy,” he said.
The new ZIG currency will play a significant role in supporting and sustaining current macroeconomic stability and economic resilience, despite global and domestic shocks. The Reserve Bank, in collaboration with the government, will promote increased use of the local currency by 2030.
The issuance of ZIG currency will be supported by strong macroeconomic fundamentals, including favorable balance of payments, fiscal stability, optimal money supply management, and a safe and sound banking sector. The country’s foreign currency generation capacity has remained robust, with increased foreign currency receipts in recent years.
Dr. Mushayavanhu highlighted the positive impact of these receipts, stating, “The robust foreign currency receipts supported the improved foreign currency deposits in the banking sector, foreign currency circulating in the economy, and overall aggregate demand.”
The Governor also stated that the introduction of gold coins and Gold-Backed Digital Tokens (GBDTs) has also been instrumental in managing liquidity. These value preservation instruments have been well-received by both corporations and individuals. The Reserve Bank has sold a significant number of gold coins, with the bulk being purchased by corporates. The introduction of GBDTs has increased the divisibility and affordability of gold coins.
In conclusion, the introduction of the ZIG currency is a significant step toward restoring confidence and stability in the Zimbabwean economy. The Reserve Bank’s commitment to strict adherence to the principles of the new currency, including full backing of reserve money, will contribute to sustained currency stability. The government, in collaboration with stakeholders, will continue to promote the increased use of the ZIG currency to support sustained and inclusive economic growth and development in Zimbabwe.
As Dr. Mushayavanhu concluded, “I, therefore, call upon all stakeholders to continue observing good business ethics and pricing models to complement the Reserve Bank’s efforts to sustain price and financial system stability, which is critical for sustained and inclusive economic growth and development.”