You shall seek ZiG and not find it: RBZ

NEW Reserve Bank of Zimbabwe (RBZ) Governor has warned economic agents against freely disposing of the Zimbabwe Gold (ZiG), a precious commodity and foreign exchange reserve-backed currency the bank unveiled last week.

RBZ Governor Dr John Mushayavanhu chillingly warned economic agents against discarding the domestic currency, a habit that became the norm in the rush for US dollars as inflation ravaged the local currency.

Responding to questions on ZTN programme “Beyond the dollar”, which followed his maiden monetary policy statement delivered last Friday, the central bank chief said ZiG would be different; as it would be a stable, strong and durable store of value.

The currency is backed by a composite basket of foreign currencies and precious commodities including US$100 million cash and 2,250 kilogrammes of gold worth US$185 million.

The central bank chief said the bank had more than three times cover the local currency in circulation.

Dr Mushayavanhu said anyone who dared to dispose of their ZiG could sell it to the central bank, but he warned time was fast approaching when they would desperately seek and not find the currency.

This, he said, was a result of the measures he announced in the 2024 MPS, which include the requirement for all companies to meet half their quarterly payment date (QPD) tax obligations in local currency.

ZTN queried why the central bank took the trouble of introducing a completely new currency when it could simply back the old currency using the same reserves it holds.

The governor responded saying the approach was necessary.

“We are bringing in a new concept in the form of a new currency, which is backed by reserves. RTGS, bond notes were not backed by reserves, this is why they were behaving the way they were behaving.

“So, we decided we have to bring in a new currency, which has a new basis for exchange rate determination and I did explain in the monetary policy statement that the exchange rate for the ZiG is going to be determined by the basket of commodities that is anchoring it.

“Over and above that, it is also going to be determined by the market.

“We had a situation, as I said earlier, RTGS bond notes were not backed by anything so we cannot link ZiG to the old currency; it’s a different currency altogether,” he said.

Further asked to explain what difference backing the currency with forex and precious metals would make given the central bank previously claimed the Zimbabwe dollar was backed by a facility from Afreximabank, but still collapsed, Dr Mushayavanhu unequivocally stated: “Yes, you are right. It was backed up to a certain amount, and they exceeded it.

“In our case, we have said, any further increase in the amount of money in circulation can only happen if we have the reserves.”

Dr Mushayavanhu said while it was his wish for all economic players to be disciplined, he had little power to force economic agents to do so. However, he chillingly warned saying: “The fundamentals of ZiG, will force them.

“What do I mean by that, if anyone wants to bet against ZiG and sell it to the central bank, we will buy; we can buy all of it.

“We have enough reserves to buy it, all the ZiG that is in the market, but you will be aware that there are certain measures that we announced in the monetary policy statement.

“We have agreed with the Treasury that come the June QPDs, companies are going to be required to pay 50 percent of their QPD obligations in ZiG. So, they are going to have to look for ZiG and here is the Math.

“The ZiG currently in circulation is equivalent to just under US$80 million. The Treasury, on a quarterly basis collects plus or minus US$300 million equivalent. 50 percent of that is US$150 million; there is not enough ZiG in the whole country to meet that 50 percent.

“So, ZiG is going to be valuable whether you like it or not,” Dr Mashuyavanhu said in a tacit warning against careless disposal of a currency economic agents will need in bulk shortly but may not be aware would be in short supply.

The central bank chief said in an environment characterised by excessive liquidity, citizens and economic agents feel it via currency depreciation and inflation, further stressing that during his tenure “you won’t feel it.”

What this means is that companies will need to “come to the central bank” and buy the same currency, possibly for a much higher price if the currency appreciates.

The central bank chief was also asked to address concerns about lack of confidence in Zimbabwe’s monetary system. In response, Dr Mushayavanhu said the confidence of the public and economic agents was something authorities could not legislate but needed to earn.

Part of the strategy to rebuild the lost confidence would be religiously sticking to commitments and policy pronouncements.

“We have set up an implementation committee at the central bank, which is looking at everything that we said we were going to do in that monetary policy statement, and tracking on a daily, weekly, monthly basis to make sure that everything is happening according to plan, if not, we quickly correct.

“Only if people see things happening in the way we stated in the monetary policy will they begin to say ‘you know what?

“These people know what they are doing, we can believe in them, but beyond that, I cannot go to people and say ‘You must have confidence’,” he said.-ebusinessweekly