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NewsDay

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Minister confirms structure to ‘drip feed’ ZWG into economy

Business
Since its introduction in April to replace the Zimdollar (ZWL$), there has been a growing shortage of ZWG in the market amid fears this would promote the use of the United States dollar and work against the government’s de-dollarisation thrust.

FINANCE, Economic Development and Investment Promotion deputy minister David Mnangagwa has admitted that the Zimbabwe Gold (ZWG) currency is being drip-fed into the market amid widespread shortage of the local currency.

Since its introduction in April to replace the Zimdollar (ZWL$), there has been a growing shortage of ZWG in the market amid fears this would promote the use of the United States dollar and work against the government’s de-dollarisation thrust.

Government and the Reserve Bank of Zimbabwe (RBZ) have in the past said the banks had enough ZWG to cater for the market.

In an interview with NewsDay Business, Mnangagwa said the ZWG was being drip-fed into the economy to protect its value.

“What is happening now that is different from what was happening during the ZWL$ era is that there is less velocity for our money. Prior to that,  you find that each time someone held local currency they would get rid of it in the next few minutes and within the next day because they were trying to hedge against inflation,” he said.

“Right now, from the inception of ZiG [now ZWG], you will find out that when one gets ZiG they will hold on to it, because of the value that it has, which means that it is not going to circulate as much. But with that said, the Reserve Bank and government will not be tempted to print more because we have a structure that constrains how much money supply can be there. So, in my view, it is a good thing.”

Mnangagwa said the central bank did not influence how banks disburse monies.

“When you speak to the banks, they tell you that people are not withdrawing the notes and the coins,” Mnangagwa said.

“When you speak to the people, they will tell you when you go to the bank, they are saying that we do not have so that creates a bit of a situation where we still need to investigate what is going on. But, the Reserve Bank is not waiting while the market is being starved. They have taken active measures to do that.”

Different sectors continue to raise concerns over the shortage of cash in the economy as it is affecting the day-to-day operations of businesses and consumer livelihoods.

“On the issue that the central bank gave out an instruction for banks to limit giving out the ZWG cash and coins, there can be no merit to such speculation because it would be very difficult for such an order to be superintended over,” Mnangagwa said.

He noted that the central bank had tried to resolve the matter by introducing withdrawal spots for ZWG in different cities through Homelink.

Economist Vince Musewe said there was a need to improve the money supply as it is impacting the growth of the economy.

“The bottom line is that there should be adequate liquidity in the market for people to either save or transact. Cash is the energy to economic activity,” Musewe said.

“If there is not enough ZWG out there it means that money supply is out of sync with demand and the responsibility of the RBZ is to manage that situation. It is clear that the market has been drip-fed with the ZWG in fear of the parallel market.”

While an increase in money supply leads to currency volatility, its absence can hurt economic growth.

This is because businesses and consumers may struggle to access the funds they need for investment and spending, slowing down economic activity and expansion.

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