BUSINESS wants the Zimbabwe Gold (ZiG) currency to be scrapped owing to its volatility despite the central bank’s insistence that the six-month-old currency is here to stay.
Speaking at the CEO Africa Roundtable (CEO ART) currency review breakfast meeting in Harare yesterday, CEO ART chairperson Oswell Binha said the ZiG had become a tool for arbitrage, causing more harm than good to the economy.
Binha said the ZiG faced the same fate as its predecessors, the Zimbabwe dollar, RTGS dollar and bond notes, that were eventually scrapped.
“So, (Reserve Bank of Zimbabwe) deputy governor (Innocent Matshe), let me start by provoking this conversation by calling for an immediate removal of the ZiG from the basket of currencies and allowing for the trading of other currencies until we get to such a time when we decide to have a stable currency,” Binha said.
“We need to have time to have these serious conversations of a currency referendum involving everybody to navigate and decide which currency to use.
“I think it is time that all economic players be given the opportunity to be involved and be able to make the right choices.”
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The local currency that authorities say is backed by gold and forex reserves, has been under pressure in the past two months, taking a beating against the United States dollar on the parallel market.
RBZ was last month forced to devalue the ZiG by 43% to 24,39 per dollar as part of measures to allow greater exchange rate flexibility in line with increased demand for foreign currency in the economy.
The dollar was yesterday trading at ZiG27,2821 on the interbank market and between ZiG35 to ZiG40 on the parallel market.
Some businesses have already moved away from reporting their financial results in the local currency in favour of the greenback.
Speaking at the same meeting, Matshe said the country was not facing a currency crisis, but the market was determining the appropriate exchange rate.
“Make no mistake about the ZiG, it is here and it is here to stay,” Matshe said.
“Another thing that you need to remember is that ZiG is not like the RTGS or the Zimbabwe dollar we used to have.
“The starting point here is that the country is not facing a currency crisis.”
Upon its introduction, the apex bank said the ZiG was backed by gold and other precious minerals as well as foreign reserves.
It was introduced at a rate of ZiG13:50 to US$1.
Informal traders and some formal businesses are now rejecting the local currency because of its volatility as it continues on a free-fall.
Economic analysts want authorities to let the ZiG freely float if it is to gain acceptability.
But Matshe said the ZiG was not collapsing and instead floating freely.
“The Reserve Bank has allowed for greater flexibility in the interbank market,” Matshe said.
“The flexibility is what you wanted, and now you are saying that the ZiG is now in the graveyard. This cannot be called a crisis. Let us not fool ourselves and think that just because there was a depreciation, the currency is collapsing.”
He noted that the current monetary policy measures in place were adequate to sustain the economy in the short to medium term growth.
“While month-on-month inflation is expected to decrease this month, going forward, inflation is expected to stabilise,” Matshe said.
“Even if you look at the current prices, they have stabilised because the exchange rate is now in line with the prices that the retailers were using before all this.
“If you ask me, if the current measures that are in place are adequate to restore stability in the economy, I would say yes in the short to medium term. We expect that as growth picks up, it will translate into long-term growth.”
Zimbabwe has been experimenting with currencies after the initial scrapping of the Zimbabwe dollar in 2009 due to hyperinflation, with the ZiG being the country’s sixth attempt to introduce a stable currency.
Economist Prosper Chitambara said the multi-currency regime must be allowed to continue accompanied by reforms meant to restore confidence and trust in the ZiG.
“A combination of monetary, institutional and fiscal reforms are critical in my view for the full restoration of confidence and trust in the local currency. So, I think the current system is good without necessarily going either extreme to full de-dollarisation or full dollarisation,” Chitambara said.