JUSTICE, Legal and Parliamentary Affairs minister Ziyambi Ziyambi had a torrid time in Parliament on Wednesday, while responding to the legislators who raised concerns over the currency devaluation despite the rising price of gold on the world market.
The ZiG depreciated to US$1:ZWG24,39 from a prior day comparative of US$1:ZWG13,99 on September 27 this year.
It was yesterday trading at ZiG26,6535 at the interbank market.
The ZiG was introduced in April this year as a stable currency as it was said to be backed by gold and forex reserves. It was backed by US$450 million in foreign reserves, as of October 10, according to Reserve Bank of Zimbabwe governor John Mushayavanhu.
However, Mbizo legislator Cobarn Madzivanyika (Citizens Coalition for Change) questioned how people could trust the ZiG as a store of value when its exchange rate is losing value despite the rising price of gold on the global market.
“In terms of encouraging demand for the ZiG, how best can you deal with this issue of inconsistence in your pronouncements? On March 8, 2024, the governor of RBZ indicated that the currency is going to be backed by gold and a basket of foreign currencies and also that the interbank exchange rate will be determined by inflation differential between ZiG and USD as well as the price of gold.
“The question, therefore, how best can people desire to have the ZiG as a store of value under the circumstances where the value of gold is rising and the exchange rate is losing value? How are you going to deal with this contradiction to allow people to want to keep ZiG as the store of value?” Madzivanyika asked.
Ziyambi, however, said the ZiG was backed by reserves comprising gold, foreign currency and other precious minerals, totalling around US$400 million.
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“The whole idea (was) bringing in ZiG and having it backed in our reserves, be it of gold or forex. The currency that is in circulation in terms of ZiG at the moment is around ZiG10.6 billion and our reserves that are backing up this currency are around US$400 million,” he said.
“If you do the mathematics and if government wakes up today and say we want to dispose of our reserves and buy back the ZiG, the rate at which that will wipe up all the ZiG will not be more than ZiG23,5 per US$.”
He said the government was aware of the currency in circulation.
“When payments are done by the government, we know exactly what we would have paid, and we know the effect that those payments can have,” Ziyambi said.
“That is now under control, and we are not paying more than what we believe the market can absorb. The idea that the currency was pegged to gold is his own idea.
“The statement was that our currency is going to be backed by reserves that consisted of gold, USD, and other precious minerals. There is a difference between backing and pegging. Pegging is not allowed in the monetary field.”
But Hwedza North legislator Itai Ndudzo (Zanu PF) demanded that Finance, Economic Development and Investment Promotion minister Mthuli Ncube provides a ministerial statement addressing the recent devaluation of the local currency.
“Mr Speaker Sir, it is important for the Honourable Minister of Finance, Economic Development and Investment Promotion to bring a ministerial statement to this august House to fully explain; firstly, the disequilibrium of having a gold-backed currency devalued by 44% when the price of gold per ounce has phenomenally risen.
“Secondly, the interventions being implemented by monetary and fiscal authorities to provide safety needs to Zimbabwean pensioners, war veterans, civil servants and the public in general who get their remuneration in local currency, which, in the twinkle of an eye, has devalued by 44%,” he said.
