PERSISTENCE Gwanyanya, a member of the Reserve Bank of Zimbabwe’s (RBZ) Monetary Policy Committee, has said the country is in dire need of an alternative to United States dollar as a store of wealth amid increased demand for the greenback.
The remarks by Gwanyanya come as the six-month old Zimbabwe Gold (ZiG) has stuttered, amid fears it would be rejected in formal markets.
Chief executives this week called for scrapping of the local currency arguing that it was fuelling arbitrage opportunities due to a mismatch between official and parallel market exchange rates.
In an interview with NewsDay Business, Gwanyanya said there was now a need to underwrite the ZiG to create demand for the currency.
“I do not think we condone non-payments of service providers by the government. When service providers have provided service to the government, including employees and other service providers, they should be paid within agreed timeframes,” he said.
“But the concern that is coming from the market is obviously that when the payments are made, we have seen in most cases, that it is spinning the market out of control, but which speaks to a problem of value preservation in the market.”
He said the recipient of those payments were seeking to preserve the value of their ZiG.
“So, it also speaks to the need for alternatives and wider options to preserve value,” Gwanyanya said.
- Rampaging inflation hits Old Mutual . . . giant slips to $9 billion loss after tax
- Monetary measures spur exchange rate stability: RBZ
- Zim deploys IMF windfall to horticulture
- Banker demands $21m from land developer
Keep Reading
“As it is currently, the challenge is the US dollar seems to be the readily available and widely accepted value preservation option, which is why every time payments happen at the government, you are concerned about the government because it is the biggest player in the market.”
He expects the 2025 National Budget to make more taxes exclusively payable in ZiG to reduce pressure on the demand for the US dollar.
“We see pressure on foreign currency. It speaks to the need to expand our proposition for the use case of the ZiG currency. But that use case for the ZiG currency is more impactful in government,” Gwanyanya added.
“The government is the biggest player where the payments of, among other statutory obligations, duties, taxes and administered fees are payable in ZiG and to a greater extent exclusively payable in ZiG.”
He said Treasury had indicated this is where the nation was going.
“But, we expect that as the fiscal policy is announced, the budget for 2025 is announced, we expect those issues to be taken care of. There is a need for super demand for the ZiG,” Gwanyanya said.
“But outside government, you are also looking at local authorities, they also need to underwrite the ZiG currency, so there is more use for the currency. But also, even in the private sector space, there is a need for investment avenues for the ZiG.”
He noted that the recently formed Liquidity Management Committee still had a lot of work to do to manage liquidity injection and the exchange rate.
RBZ deputy governor Innocent Matshe said the country was not going to experience another sharp depreciation of the exchange rate this year such as the one that occurred last month.
The ZiG on September 27 depreciated by 43% to ZiG 24,39 per dollar, in the biggest drop since its debut in April.
“Let me be very clear, the fact that there is liquidity injection in the market does not mean that there will be a depreciation. It depends on where that liquidity is destined for and how it is used to permeate into the economy. We have not seen those bullet payments since the beginning of this monetary policy statement. Why? Because the Reserve Bank and the Ministry of Finance established a liquidity management committee,” he said.
“That committee monitors liquidity before it is injected, during the injection and post that injection. Therefore, we believe that together with other structures within the bank and the monetary system, we have adequate tools to monitor injections and their impact on the economy. Therefore, we should not expect a depreciation even into November or any time when the civil servants are going to receive their bonuses.”
He expects the inflation rate to start trending downwards next month on a month-on-month basis.
