Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu has said that Zimbabwe’s foreign currency reserves have risen to over US$500 million, roughly three times the total amount of Zimbabwe Gold (ZiG) in circulation.
Since the September devaluation, the ZiG has gained ground against the US dollar, appreciating from US$1:ZiG27,4 at the end of October to US$1:ZiG25,6 by Friday.
In an interview with <a href="https://www.sundaymail.co.zw/foreign-currency-reserves-rise-to-us500m">The Sunday Mail</a>, Mushayavanhu attributed the strengthening of the ZiG to a range of measures, including the central bank’s decision to raise its benchmark interest rate from 20% to 35% in September.
This was done to curb inflationary pressures and tighten liquidity in the market.
Furthermore, the RBZ introduced changes to the statutory reserve requirements, setting them at 30% for both demand and call deposits in local and foreign currencies. For savings and time deposits, the reserve requirement was set at 15%. Said Mushayavanhu:
<blockquote>
The combined effect of these measures has significantly reduced ZiG liquidity in the market.
The exchange rate has also strengthened, benefitting from increased foreign currency receipts.
</blockquote>
Zimbabwe’s foreign currency receipts increased by 18% during the nine months leading up to September, compared to the same period the previous year. Added Mushayavanhu:
<blockquote>
The ZiG:US dollar exchange rate has, therefore, been appreciating under the willing-buyer, willing-seller arrangement, in line with market fundamentals, reflecting the supply and demand dynamics of foreign currency on the interbank market.
The tight ZiG liquidity conditions amid a tight monetary policy stance in the market have seen increased willingness by economic agents to liquidate their foreign currency positions, thereby creating demand for ZiG.
These conditions have largely contributed to the appreciation of the currency.
Currently, the total reserve money in local currency as of November 6, 2024 is about ZiG3,4 billion, which is about US$129 million, against foreign currency reserves of US$509 million.
The Reserve Bank’s total foreign currency reserve holdings of more than US$500 million as at November 1, 2024 are also more than the total bank deposits in the domestic currency of about ZiG12 billion — giving an implied exchange rate of around US$1:ZiG24.
The Reserve Bank has, therefore, since April 5, 2024, consistently held more than sufficient reserves to back the ZiG currency to ensure its stability.
</blockquote>
Mushayavanhu said the Reserve Bank will continue to intervene in the foreign exchange market by utilising 50% of the 25% export surrender requirements.
This intervention aims to support smooth market operations, meet legitimate foreign payment demands, and strengthen reserve holdings to maintain the stability of the Zimbabwe Gold (ZiG). Said Mushayavanhu:
<blockquote>
The full backing of the local currency reserve money ensures that at each point the Reserve Bank has adequate foreign currency reserves to intervene in the market and ensure the stability of the local currency.
Currently, the Reserve Bank reserves have topped US$500 million, which implies more than three times the cover of reserve money.
</blockquote>
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Pindula News

Zimbabwe has a lot of foreign currency saved, more than US$500 million. This is three times the amount of their local currency, Zimbabwe Gold (ZiG), in circulation. The value of ZiG compared to the US dollar has gone up recently. The Reserve Bank of Zimbabwe made some changes to help make the ZiG stronger and more stable. They also have enough reserves to support their currency. This is good for the country's economy and helps keep everything in balance. It's important to have enough foreign currency saved to keep the local currency strong and stable.

Forex Reserves Hit US$500 Million, Three Times The ZiG In Circulation, Says RBZ

Finance and Economic Development Minister Mthuli Ncube said that the country’s increased foreign currency receipts, which reached US$11.6 billion in 2022, have helped companies retool and boost investments.
Ncube told the <a href="https://www.sundaynews.co.zw/fresh-moves-to-promote-use-of-local-currency/">Sunday News</a> that the bulk of forex inflows are exporters’ receipts, which is nearly US$10 billion, while diaspora remittances were US$2 billion. He said:
<blockquote>
We have two types of inflows, the bulk are exporters’ receipts, which are the private companies mainly in the mining sector, and the small bit, which is $2 billion worth of remittances from the diaspora.
The first part, which is almost US$10 billion, are export receipts, as you know we have a retention policy which, as we speak, is at 25 percent.
This is what we force the companies to convert to Zimbabwe dollars and then we take that and use it to feed the auction, to spread these US dollars across other sectors that do not earn foreign currency.
These United States dollars are actually in the hands of private companies and they are using these to retool and recapitalise.
These companies are able to invest, create jobs, manufacture new products, retool, and this has helped reduce pressure on Government to supply them with US dollars through the auction.
</blockquote>
During the interview with State media, Ncube also said the Government will maintain interest rates at par with inflation to promote the use of the Zimbabwe dollar in local transactions.

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