The Reserve Bank of Zimbabwe (RBZ) continues to place its confidence in the local gold-backed currency, Zimbabwe Gold (ZiG), as a competitive alternative to major currencies such as the United States dollar.
Speaking at a recent Tourism Business Council of Zimbabwe (TBCZ) event, RBZ Governor John Mushayavanhu defended the ZiG, asserting that the central bank’s monetary policies are key to maintaining the currency’s stability. According to the governor, the exchange rate between ZiG and the USD is showing positive movement, signaling growing confidence in the local currency.
“The ZiG to USD rate is strengthening,” Mushayavanhu stated, emphasizing that preserving confidence in the local currency remains a core priority for the central bank.
Zimbabwe introduced the ZiG in April of the previous year in response to the volatility of exchange rates and soaring inflation. To stabilize the currency, the RBZ has implemented stringent monetary policies, including high-interest rates aimed at curbing speculative borrowing.
The central bank’s goal is to ensure the long-term stability of the ZiG, positioning it as a fundamental pillar for the nation’s economy. Mushayavanhu also reiterated the country’s commitment to de-dollarization, with a target set for 2030 to return to a mono-currency system based on the local currency.
Economists and business leaders agree that the reliance on the US dollar is unsustainable due to its strong influence, which hampers the competitiveness of local products on the international market. Additionally, the limited availability of US dollars restricts the RBZ’s ability to effectively use monetary policies to manage the economy.
To boost confidence in the ZiG and improve its performance, the RBZ has allowed businesses greater flexibility in setting their prices. The central bank stated that economic agents can freely determine prices using any exchange rate between the USD and ZiG that reflects market realities, rather than being bound to the official RBZ rate.
Governor Mushayavanhu clarified that the Financial Intelligence Unit (FIU) would not penalize businesses for choosing exchange rates that differ from the official rate, provided the price margins remain reasonable. He further warned that businesses attempting to manipulate the market with unrealistic exchange rates would risk losing their competitiveness.
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In a significant move, some fuel traders have approached the RBZ with proposals to sell fuel using the ZiG to settle local transactions. Mushayavanhu mentioned that over time, fuel suppliers may voluntarily switch to selling the commodity in the local currency, helping to support Zimbabwe’s economic stability.
“We want to avoid a return to long fuel queues and shortages,” he added, indicating that policy decisions would be made with a focus on achieving long-term economic stability.
Lastly, Mushayavanhu dismissed calls for preferential foreign exchange access for capital projects, reinforcing the need for realistic exchange rates based on Zimbabwe’s economic fundamentals. RBZ Deputy Governor Innocent Matshe suggested that a fair exchange rate for the ZiG should be around US$1 to ZiG22, a level expected to gain market acceptance.
