News / National
Zimbabwe needs alternative to US$
25 Oct 2024 at 14:40hrs | Views
Persistence Gwanyanya, a member of the Reserve Bank of Zimbabwe's (RBZ) Monetary Policy Committee, has underscored the urgent need for alternatives to the US dollar as a store of value, highlighting challenges Zimbabwe faces as demand for the dollar grows. The comments follow a faltering start for the Zimbabwe Gold (ZiG) currency, introduced in April as a potential hedge against dollar dependence, yet struggling to gain traction in formal markets.
The call for alternatives comes amid debates within the business community, where executives have urged the government to scrap the local currency, claiming it fosters arbitrage opportunities due to discrepancies between official and parallel exchange rates. In an interview with NewsDay Business, Gwanyanya noted the currency's issues, including delayed payments to government contractors, which contribute to the market's instability.
"The concern that is coming from the market is that payments in ZiG often result in market volatility," Gwanyanya said. "Recipients are looking for ways to preserve their ZiG payments' value, and right now, the US dollar is seen as the stable option for value preservation."
To improve ZiG's acceptance, Gwanyanya anticipates that the 2025 National Budget will introduce measures requiring more taxes to be paid in ZiG, reducing pressure on US dollar demand. "We see the need to expand the use of ZiG, especially within government transactions, where taxes, duties, and fees should be more exclusively payable in ZiG," he said, adding that local authorities and private sector stakeholders could also play a role in creating demand.
RBZ Deputy Governor Innocent Matshe added confidence to the conversation, stating that Zimbabwe would avoid another sharp currency depreciation this year, like the 43% drop experienced on September 27, as the newly formed Liquidity Management Committee works to stabilize the market.
"With the monitoring systems we have put in place, we don't anticipate further depreciation even with upcoming liquidity injections like civil servant bonuses," Matshe assured. "The inflation rate is also expected to start trending down on a month-to-month basis in the coming weeks."
As the country grapples with maintaining stable currency value, government and monetary officials will be closely watched on their measures to encourage ZiG's usage and maintain economic stability amid increasing dollar demand.
The call for alternatives comes amid debates within the business community, where executives have urged the government to scrap the local currency, claiming it fosters arbitrage opportunities due to discrepancies between official and parallel exchange rates. In an interview with NewsDay Business, Gwanyanya noted the currency's issues, including delayed payments to government contractors, which contribute to the market's instability.
"The concern that is coming from the market is that payments in ZiG often result in market volatility," Gwanyanya said. "Recipients are looking for ways to preserve their ZiG payments' value, and right now, the US dollar is seen as the stable option for value preservation."
To improve ZiG's acceptance, Gwanyanya anticipates that the 2025 National Budget will introduce measures requiring more taxes to be paid in ZiG, reducing pressure on US dollar demand. "We see the need to expand the use of ZiG, especially within government transactions, where taxes, duties, and fees should be more exclusively payable in ZiG," he said, adding that local authorities and private sector stakeholders could also play a role in creating demand.
RBZ Deputy Governor Innocent Matshe added confidence to the conversation, stating that Zimbabwe would avoid another sharp currency depreciation this year, like the 43% drop experienced on September 27, as the newly formed Liquidity Management Committee works to stabilize the market.
"With the monitoring systems we have put in place, we don't anticipate further depreciation even with upcoming liquidity injections like civil servant bonuses," Matshe assured. "The inflation rate is also expected to start trending down on a month-to-month basis in the coming weeks."
As the country grapples with maintaining stable currency value, government and monetary officials will be closely watched on their measures to encourage ZiG's usage and maintain economic stability amid increasing dollar demand.
Source - newsday
