Innocent Sibonginkosi Ncube
During a recent session in Parliament, Justice, Legal and Parliamentary Affairs Minister Ziyambi Ziyambi faced intense scrutiny from lawmakers regarding the devaluation of the Zimbabwe Gold (ZiG) currency. The ZiG has seen a significant depreciation, dropping from US$1:ZWG13.99 to US$1:ZWG24.39 on September 27, and trading at ZWG26.6535 in the interbank market shortly thereafter.
Concerns Raised by Legislators
Cobarn Madzivanyika, a legislator from the Citizens Coalition for Change, questioned the credibility of the ZiG as a reliable store of value, especially given its decline in value despite rising gold prices globally. He highlighted the inconsistency in the government’s messaging regarding the currency’s backing by gold and foreign reserves, asking how the public could trust the ZiG under these circumstances.
“In terms of encouraging demand for the ZiG, how best can you deal with this issue of inconsistence in your pronouncements? On March 8, 2024, the governor of RBZ indicated that the currency is going to be backed by gold and a basket of foreign currencies and also that the interbank exchange rate will be determined by inflation differential between ZiG and USD as well as the price of gold.
“The question, therefore, how best can people desire to have the ZiG as a store of value under the circumstances where the value of gold is rising and the exchange rate is losing value? How are you going to deal with this contradiction to allow people to want to keep ZiG as the store of value?” Madzivanyika asked.
Ziyambi defended the currency, stating that it is backed by approximately US$400 million in reserves, including gold and foreign currency. He explained that the amount of ZiG in circulation is around ZWG10.6 billion, and he provided a mathematical rationale for the currency’s value, suggesting that if the government were to buy back the ZiG, it would not exceed ZWG23.5 per US$.
“When payments are done by the government, we know exactly what we would have paid, and we know the effect that those payments can have,” Ziyambi said.
“That is now under control, and we are not paying more than what we believe the market can absorb. The idea that the currency was pegged to gold is his own idea.
“The statement was that our currency is going to be backed by reserves that consisted of gold, USD, and other precious minerals. There is a difference between backing and pegging. Pegging is not allowed in the monetary field.”
Calls for Further Clarification
Itai Ndudzo, a member of Zanu PF, called for Finance Minister Mthuli Ncube to provide a ministerial statement addressing the recent devaluation.
He emphasized the need for clarity on the disparity between the gold-backed currency’s devaluation and the rising price of gold, as well as the measures being taken to protect those receiving payments in local currency, including pensioners and civil servants.
Conclusion
The session underscored the growing concerns among lawmakers regarding the stability and trustworthiness of the ZiG, as well as the broader implications for the economy and citizens relying on the local currency. The government’s responses and proposed measures will be closely monitored as the situation develops.
Zim GBC News©2024