Mnangagwa Confirms Structure To "Drip Feed’ ZiG Into Economy

Finance, Economic Development, and Investment Promotion Deputy Minister David Mnangagwa said that the Zimbabwe Gold (ZWG) currency, commonly referred to as ZiG, is being gradually introduced into the market amid a shortage of cash in the economy.

In a recent interview with NewsDay, Mnangagwa said ZWG was being gradually introduced into the economy as the authorities carefully managed the money supply to protect the value of the local currency. Said Mnangagwa:

What is happening now that is different from what was happening during the ZWL$ era is that there is less velocity for our money.

Prior to that, you find that each time someone held local currency they would get rid of it in the next few minutes and within the next day because they were trying to hedge against inflation.

Right now, from the inception of ZiG [now ZWG], you will find out that when one gets ZiG they will hold on to it, because of the value that it has, which means that it is not going to circulate as much.

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But with that said, the Reserve Bank and government will not be tempted to print more because we have a structure that constrains how much money supply can be there. So, in my view, it is a good thing.

Mnangagwa clarified that the central bank does not dictate how banks distribute cash, emphasizing that authorities have not issued directives to restrict the issuance of ZWG currency, including cash and coins. He said:

When you speak to the banks, they tell you that people are not withdrawing the notes and the coins.

When you speak to the people, they will tell you when you go to the bank, they are saying that we do not have so that creates a bit of a situation where we still need to investigate what is going on.

But, the Reserve Bank is not waiting while the market is being starved. They have taken active measures to do that.

On the issue that the central bank gave out an instruction for banks to limit giving out the ZWG cash and coins, there can be no merit to such speculation because it would be very difficult for such an order to be superintended over.

He said to address the shortage of ZWG cash, the central bank has introduced withdrawal spots in different cities through Homelink.

Economist Vince Musewe told NewsDay that the RBZ should ensure that there is enough ZWG in the economy as “cash is the energy to economic activity.” Said Musewe:

The bottom line is that there should be adequate liquidity in the market for people to either save or transact. Cash is the energy to economic activity.

If there is not enough ZWG out there it means that money supply is out of sync with demand and the responsibility of the RBZ is to manage that situation. The market has been drip-fed with the ZWG in fear of the parallel market.

The shortage of cash following the introduction of ZWG in April 2024 is significantly impacting daily business operations and consumer livelihoods.

This is particularly challenging as Zimbabwe’s economy is largely informal, where physical cash plays a crucial role in trade within this sector.

More: Pindula News