RBZ Rejects Business Calls To Scrap ZiG
The Reserve Bank of Zimbabwe (RBZ) has rejected calls from the business community to remove the Zimbabwe Gold (ZiG) currency from the country’s multi-currency regime.
On Tuesday, during a CEO Africa Roundtable (CEO ART) currency review breakfast meeting in Harare, CEO ART chairperson Oswell Binha argued that the ZiG had become a tool for arbitrage, causing more harm than good to the economy.
However, RBZ deputy governor Innocent Matshe countered this view, asserting that the ZiG is here to stay. Said Matshe (via NewsDay):
Make no mistake about the ZiG, it is here and it is here to stay. Another thing that you need to remember is that the ZiG is not like the RTGS or the Zimbabwe dollar we used to have. The starting point here is that the country is not facing a currency crisis.
Matshe also denied that ZiG was collapsing, saying instead, it was floating freely. He said:
The Reserve Bank has allowed for greater flexibility in the interbank market.
The flexibility is what you wanted, and now you are saying that the ZiG is now in the graveyard. This cannot be called a crisis.
Let us not fool ourselves and think that just because there was a depreciation, the currency is collapsing.
However, Economist and banker, Nigel Chanakira, who is also the past president of Zimbabwe Economic Society, said there was indeed a crisis. He said:
What triggered what we are calling a crisis? We call it a crisis because we have a new currency that has features that promise us stability.
We have a new governor who said bad policies will not be done under my watch. I gave him the benefit of the doubt.
Only five months since the introduction, we have experienced a more than 40% devaluation of the ZiG. I think it’s astronomical.
Binha remarked that the ZiG is facing a similar fate as its predecessors—the Zimbabwe dollar, RTGS dollar, and bond notes—which were all eventually scrapped. He said:
So, deputy governor, let me start by provoking this conversation by calling for an immediate removal of the ZiG from the basket of currencies and allowing for the trading of other currencies until we get to such a time when we decide to have a stable currency.
We need to have time to have these serious conversations of a currency referendum involving everybody to navigate and decide which currency to use.
I think it is time that all economic players be given the opportunity to be involved and be able to make the right choices.
Meanwhile, Economist Prosper Chitambara said the multi-currency regime should continue, but it must be accompanied by reforms aimed at restoring confidence and trust in the ZiG. Said Chitambara:
A combination of monetary, institutional and fiscal reforms are critical in my view for the full restoration of confidence and trust in the local currency.
So, I think the current system is good without necessarily going either extreme to full de-dollarisation or full dollarisation.
The value of ZiG plummeted in September this year, from ZWG13:US$1 dropping to ZWG27.44 to the US dollar on Thursday, 24 October. On the parallel market, ZiG is currently trading between ZWG40 and ZWG50 to the US dollar.
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