Reserve Bank of Zimbabwe (RBZ) governor, Dr John Panonetsa Mangudya says the country has a robust local currency backup strategy.
He said contrary to the assumption that the Zimbabwe dollar is backed by gold, the country’s local currency, just like others in the world, is backed by fiat currency.
According to Investopedia, a fiat currency is a government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it. Mangudya said:
It is not true that our currency is backed by gold. It was the United States dollar which was last backed by gold in 1971 and that has since changed. Our currency is backed by a robust fiat currency. We have in excess of one billion United States dollars of that back up and 2.4 billion United States dollars which are enough to back our currency.
Mangudya made the remarks while appearing before the Parliamentary Portfolio Committee on Defence, Home Affairs and Security.
He also said gold and other minerals are contributing 80 per cent of the country’s exports.
He added that gold and other minerals contributed five out of the six billion United States dollars the country received.
His remarks come as the local currency is losing value against other currencies, especially the United States dollar at a very paced rate.
Analysts say the Zimbabwe dollar was prematurely reintroduced before the country had met all the fundamentals.