Finance Minister Mthuli Ncube is urging Zimbabweans not to worry about another volatility wave in the Zimbabwean currency (ZWG) as the country’s US dollar reserves are now at par with the ZWG 10 billion balance.
This reassurance comes after a rapid exchange rate depreciation occurred between August and September 2024, causing retailers to favor the US dollar over the local currency.
According to Ncube, the current exchange rate of US$1: ZWG25 ensures that the country has enough reserves to cover the entire ZWG deposits in the banking sector. He explained that the local currency deposits amount to ZWG10 billion, which is equivalent to US$425 million worth of reserves at the current exchange rate.
To alleviate concerns, Ncube highlighted the measures taken by the Reserve Bank of Zimbabwe (RBZ) to strengthen the currency, including:
- Raising Interest Rates: to remove speculative demand for foreign currency
- Increasing Reserve Requirements: to increase the cost for lenders and block speculative borrowing
These efforts aim to restore stability and prevent the exchange rate from coming under pressure. With the country’s US dollar reserves matching the ZWG 10 billion balance, Ncube believes there’s no reason for panic.
It’s worth noting that Zimbabwe has experienced currency fluctuations and hyperinflation in the past, leading to the introduction of a new currency, the RTGS Dollar, in 2019, and later the Zimbabwean gold-backed currency, ZiG, in 2024.
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