ZiG Currency Gold Reserves Reach US$450 Million - RBZ
The Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu has said the gold reserves backing the ZiG (Zimbabwean Gold) currency have increased to over US$450 million, up from US$375 million in June this year.
He said this increase in gold reserves means the exchange rate will remain stable.
On September 27th, the RBZ adjusted the official exchange rate from ZiG14 per US$1 to ZiG24 per US$1.
However, by October 11th, the exchange rate had slid to ZiG26.33 per US$1, indicating a continued devaluation of the local currency since the initial adjustment.
In an interview with ZBC News on Thursday, 10 October, Mushayavanhu said that the recent exchange rate movements cannot be described as a devaluation, but rather a response to market forces within the willing buyer and seller foreign exchange market. He said:
First and foremost, what happened can not be described as devaluation. It was just a manifestation of the event on the ground where the parallel market had just set its agenda, including the retail sector and all the other economic agents in the economy.
Mushayavanhu said the RBZ remains committed to economic stability and anchoring growth and does not expect any further significant movements in the exchange rate. He said:
I am not expecting any further movements in the exchange rate. Let me give you some figures. As of yesterday, total deposits in this whole market were ZiG10.7 billion reserves, and our foreign reserves were US$450 million.
Mushayavanhu further clarified the distinction between a gold-linked and a gold-backed currency.
He said the ZiG is backed by gold and other precious metal reserves, as well as foreign currency balances held with the Federal Reserve. Said the RBZ Governor:
Our currency is backed by gold and other precious metals, and the foreign currency balances that we have with the Federal Reserve, there is a difference between backing a currency with gold and linking a currency to the prices of gold.
Meanwhile, economic commentator Professor Gift Mugano has expressed scepticism about the RBZ’s ability to stabilise the exchange rate.
According to Mugano, the central bank lacks control over the excessive liquidity being injected into the economy by the Treasury.
Mugano predicted that in the coming weeks, several factors will contribute to further exchange rate volatility. Firstly, the government will be funding the upcoming agricultural season, which requires significant financial resources.
Secondly, there will be bonus payments and increases in ZiG (Zimbabwean Gold) salaries. Thirdly, the government will be increasing payments to contractors ahead of the rainy season.
Finally, the Treasury will be making last-minute payments to ministries, departments, agencies, and suppliers before the end of the fiscal year, as is typically the case in December.
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