Business Reporter
The Reserve Bank of Zimbabwe (RBZ) has attributed the difficulties faced by the new Zimbabwe Gold (ZiG) currency to “rent seeking and speculative behaviour” prevalent in the parallel market.
The ZiG was introduced in April 2024 as a response to the collapse of the local currency, previously known as the RTGS.
Initially pegged at a fixed rate of ZWG13.56 against the US dollar, the ZiG is now trading at approximately ZiG45 to US$1 in both the official and parallel markets.
Nicholas Masiyandima, the RBZ’s deputy director for economic research, modelling, and policy, addressed these issues at the 42nd Employers’ Confederation of Zimbabwe Annual Congress in Victoria Falls. He remarked,
“And then one wonders who then or what then is driving the parallel exchange rate that we see and the premiums that we see, the turbulence that we see? On that let me indicate that issues of rent-seeking and also even issues of speculative purchasing or even pegging of exchange rates have also become increasingly rampant.”
Masiyandima further explained,
“Probably because of issues of confidence that I have indicated in the beginning, and even issues of trying to be forward-looking in terms of leading against potential losses.”
He emphasized that the pressures on the exchange rate and inflation are not solely due to “reckless currency issuance by the central bank or by the government,” but are also significantly influenced by speculative tendencies.
He noted that the monetary policy remains tight, stating,
“The ZiG3.1 billion reserve money as at October 4, 2024, was more than three times covered by the gold and foreign exchange reserves amounting to US$419 million on the same date.”
Masiyandima added that the foreign reserves position is adequate to cover the entire local currency money supply of ZiG10.8 billion, asserting that this amount is insufficient to cause significant disruption.
While industry representatives have expressed concerns over foreign currency shortages affecting operations, Masiyandima pointed out that the uptake on the willing buyer willing seller platform remains low. He explained,
“On the day when the major devaluation from about ZiG14 to about ZiG25, the Reserve Bank also intervened in the willing buyer, willing seller market by injecting US$50 million. And, to tell you, of that US$50 million, initially, it was injected at an exchange rate higher than ZiG25.”
He highlighted the lack of uptake, stating,
“There were no uptakes. But, here are the facts that I’m telling you about, from the millions of US dollars that is getting into the market and only 60% is being taken up.” He further clarified that during the major decline, only 70% of the injected funds were actually utilized.
Masiyandima urged businesses to operate within expectations and effectively use the willing buyer willing seller facility, noting, “The challenges that we seem to have are issues of liquidity shortages, which we still need to have in the meantime to sustain stability on prices and on the exchange rate.” He concluded, “Until we’ve got that being sustainable, then we have to live within that particular restrictive monetary policy in the meantime.”
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