Mnangagwa confirms structure to 'drip feed' ZWG into economy

Deputy Minister of Finance, Economic Development, and Investment Promotion, David Mnangagwa, acknowledged that the introduction of the Zimbabwe Gold (ZWG) currency in April has been characterized by a gradual release into the market amidst a notable scarcity of the local currency.

Since its launch to replace the Zimdollar (ZWL$), there has been a growing shortage of ZWG, raising concerns that this could encourage greater reliance on the United States dollar and contradict the government's efforts to de-dollarize the economy.

While both the government and the Reserve Bank of Zimbabwe (RBZ) have assured that banks possess sufficient ZWG to meet market demands, Mnangagwa explained in an interview with NewsDay Business that the cautious distribution of ZWG aims to safeguard its value.

He highlighted a significant shift from the ZWL$ era, noting reduced circulation velocity where holders of ZWG tend to retain it due to its perceived stability. Mnangagwa emphasized that this cautious approach prevents excessive money supply, aligning with a structured framework aimed at maintaining financial stability.

Regarding concerns about cash shortages impacting daily operations and consumer livelihoods, Mnangagwa clarified that the RBZ has taken proactive steps to address these challenges, including the establishment of withdrawal points for ZWG in various cities through Homelink.

Economist Vince Musewe underscored the necessity of balancing money supply to support economic activity, asserting that adequate liquidity is vital for savings and transactions, essential components for economic growth. He cautioned that insufficient ZWG availability could disrupt economic activities and called for effective management by the RBZ to avoid adverse effects on the economy.