Apex Bank finalising on gold digital tokens

THE Reserve Bank of Zimbabwe (RBZ) is finalising the modalities of rolling out the Gold Backed Digital Tokens (GDBT) as a medium of exchange for domestic transactions to complement the US dollars, governor Dr John Mangudya has said.

Presenting the Mid-Term Monetary Statement, Dr Mangudya also projected inflation to ease this year with an annual rate expected to end the year between 60 and 70 percent while maintaining the key bank policy rate at 150 percent.

The central bank first introduced the gold coins as an alternative store of value and this has proved to be a critical monetary policy instrument for mopping up excess liquidity.

Over $35 billion has been mopped up from the sale of 36 059 coins.

The first batch matured in January and only 2 percent were redeemed, indicating a strong risk aversion among investors.

To complement the sale of physical gold coins and expand the value-preserving instruments available in the economy, enhance the divisibility of the investment instruments, and widen their access and usage by the public, the RBZ introduced GBDT in May this year, fully backed by physical gold held by the central bank.

As of July 2023, the RBZ had issued 325,02 kg worth of GBDT valued at $50,5 billion and US$7,794 million.

“The bank is at an advanced stage in the preparations for the eventual rolling out of GBDT for transactional purposes in phase two of the project under the code or name ZiG, which stands for Zimbabwe Gold,” said Dr Mangudya.

“It is envisaged that the transactional phase will see GBDT complementing the use of the US dollar in domestic transactions.” Dr Mangudya said the bank will conduct awareness campaigns countrywide to educate the public on the use and benefits of tokens.

“The GBDT are envisaged to form the basis for the development of the country’s central bank digital currency (CBDC) since ZiG in its current form and design exhibits most of the characteristics of a CBDC,” said Dr Mangudya.

The central bank chief said the upward trend of month-on-month inflation, which sharply reversed in July 2023 to minus 15,3 percent is expected to continue in this month.

The bank would continue to enhance the efficiency and operations of the foreign exchange market by strengthening the Willing-Buyer Willing-Seller trading arrangement.

Dr Mangudya noted that the introduction of the wholesale foreign exchange auction to address the supply side issues in the interbank foreign exchange market on the back of the recent liberalisation of the exchange rate had seen the parallel market exchange rate premium declining from more than 100 percent in May to below 20 percent.

It is expected to narrow further as the Zimbabwe dollar parallel market exchange rate appreciates.

The interventions supported by tight monetary policy, have resulted in the elimination of foreign exchange distortions and arbitrage opportunities in the economy, said Dr Mangudya “as the market corrects towards the market clearing equilibrium.”

The central bank maintained the key policy rate, which determines minimum commercial bank interest rates, at 150 percent and this will be reviewed in line with developments in the month-on-month inflation.

The medium-term accommodation, at 75 percent, will also be reviewed in line with inflation developments and long-term productive sector funding needs,” said Dr Mangudya.-ebusinessweekly