ZIMBABWE Gold (ZiG), the new currency introduced by the central bank on April 5, is trading at about US$1:ZiG23 on the widely used parallel market as it lost significant value after being unveiled at US$1:ZiG13,56.
Days after the currency was introduced, black market dealers who hold big sums of United States dollar stocks, pegged it at US$1:ZiG18 against the official rate of US$1:ZiG13,56.
It depreciated to US$1:ZiG20 before the Independence Day holiday on April 18 and the following day some dealers were trading the local unit at US$1:ZiG23.
This sparked fears that the new currency may go the same way as bond notes, which were decommissioned to make way for the ZiG.
However, the ZiG has been gaining value on the official market where it traded at US$1:ZiG13,34 last Wednesday, a day before the markets closed for the holiday, and US$1:ZiG13,31 two days later.
Ordinary people, who require US dollars cannot walk into a bank and exchange the domestic unit for the greenback and they are still flocking to the black market amid fears this would have a huge bearing on confidence in the new currency.
Reserve Bank of Zimbabwe (RBZ) governor John Mushayavanhu said measures announced since the new currency came on board would help the gold-backed unit hold ground.
Mushayavanhu said in the coming months, the ZiG would be the currency of choice.
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“What I can tell you is that the days of illegal money changers are numbered,” the RBZ boss told Standardbusiness.
“ZiG is fully convertible. If you have a genuine need for forex, let us say you have an invoice to pay in forex, you go to your bank and that forex will be available to you and they debit your ZiG account if you have got the money in the account.”
According to the governor, the plan is that since half of the quarterly payment date (QPD) taxes will be in ZiG, by the end of this second quarter there will be a scramble for the ZiG.
This rush for ZiG will in turn increase demand for the local currency and reduce the need for forex, which will render parallel forex dealers irrelevant.
“Fuel service stations are going to find themselves in a situation where they have no option, but to sell in ZiG and in US dollars. Why?
“They are also taxpayers whereby they are required to pay 50% of their QPD in ZiG,” Mushayavanhu said.
“Where are they going to get their ZiG from if they are selling their product 100% in US dollars?” Mushayavanhu queried at the Zimbabwe Independent’s post monetary statement review breakfast meeting held in Bulawayo last week.
“So, you will get service stations where they will say pay, whichever you want or please pay in ZiG because they know they must hit that quarter in terms of the ZiG they must pay to Zimra (Zimbabwe Revenue Authority),” he added.
Mushayavanhu said for domestic use of US dollars, people were not allowed to approach their bank to trade ZiG for the greenback.
“We are not going to say you can go to your bank and say, ‘Here is my ZiG100 can I have a US$1 to put in my pocket?’ No.
“You can’t do that because US dollars are meant to honour foreign obligations that we have. “Not for us to trade locally,” he said.
“In an ideal world all domestic transactions should actually be domestic currency, but we do appreciate where we are whereby 80% are in US dollars and 20% are in ZiG.”
But, market analysts suggested that because of this refusal to have free funds easily accessible, the parallel forex market would continue to exist.
Economists, who doubt the quantities of minerals backing the ZiG, fear it could be battered at the same rate at the bond note and the Zimbabwe dollar, the latter of which traded at US$1:$33 090 before it was decommissioned two weeks ago.
Economist Chenayi Mutambasere said lack of confidence presented a huge risk for the ZiG.
“Alongside persistent socio-economic challenges and the manner in which ZiG was introduced, which has led to a lack of trust, we run the risk of quickly reverting to high exchange rates,” Mutambasere said.
Another economist, Prosper Chitambara, said the ZiG presented a good opportunity to reset the economy.
“ZiG presents a good opportunity to reset the economy and to contribute to macroeconomic stabilisation,” Chitambara said.
“But we have to make it work through walking the talk in as far as ensuring that we are able to sustain monetary fiscal discipline.”
