A member of the Reserve Bank of Zimbabwe’s monetary policy committee (MPC) has admitted that public confidence in the gold-backed Zimbabwe Gold (ZiG) currency, introduced in April this year, is at an all-time low.
Initially pegged at ZiG13.50 to one US dollar, the ZiG has seen a dramatic depreciation, now trading at ZiG25.48 on the interbank market. On the parallel market, the rate has surged even further to around ZiG43 to one US dollar.
Speaking at the Insurance Institute of Zimbabwe’s annual conference in Victoria Falls, RBZ MPC member Persistence Gwanyanya acknowledged the sharp decline in public trust. He said (via NewsDay):
In our case where confidence has bottomed to a historic low, on account of hyperinflation experiences insisting that the same confidence will drive stability is preposterous.
As confidence in the ZiG currency continues to decline, some service providers have started demanding payment exclusively in US dollars.
Those who still accept the ZiG have resorted to using parallel market rates to mitigate potential losses from currency fluctuations.
Despite the growing reliance on the US dollar, the government remains firm in its commitment to de-dollarisation and has stated that there is “no going back” on the policy.
To restore confidence in the ZiG, Persistence Gwanyanya suggested that the government should take concrete steps, such as charging taxes, duties, and statutory fees exclusively in the local currency. He said:
To deal with the rejection effect, there is a need to underwrite the ZiG through supper demand.
Robust use case, established around wider options for the ZiG is necessary. Government is the best to drive the demand for ZiG through taxes, duties, statutory and user fees.
We expect Treasury to increasingly pivot towards ZiG the 2025 budget. Increased appetite for ZiG by the government is seen as a confidence boosting measure, but it also means the government has to increasingly rely on the surrender funds/interbank market for its forex requirements.
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