Mono-currency transition: RBZ allays mining sector fears

The Reserve Bank of Zimbabwe (RBZ) has sought to reassure the mining sector that the planned transition to a mono-currency system will not diminish the value of foreign currency-denominated financial assets, savings or contractual obligations.

Speaking at the Annual Mining Conference in Victoria Falls, RBZ Deputy Governor Dr Innocent Matshe said the transition would not involve the compulsory conversion of United States dollar balances into local currency.

"I want to be categorical that the idea of people losing the value of their balances in accounts when we move to mono-currency is an issue that should not bother the public," Dr Matshe said.

"No balance, not even a penny, will be exchanged for any other currency without the owner's consent and without the owner's participation."

The assurances come as authorities continue preparations for an eventual transition to a mono-currency framework under the National Development Strategy 2 (NDS2), while seeking to restore confidence in Zimbabwe's financial system following the introduction of the Zimbabwe Gold (ZiG) currency.

Dr Matshe said foreign currency accounts (FCAs), US dollar-denominated pension fund investments and equities, including those listed on the Victoria Falls Stock Exchange (VFEX), would remain protected.

He stressed that the planned policy shift would only affect the currency used for domestic transactions, while foreign currency would continue to be available for international payments and other external obligations.

"The idea is that foreign currency-denominated accounts will continue into mono-currency. The only time that those balances will be exchanged for local currency is when and if the holder of that account wants to do so," he said.

According to the Deputy Governor, existing contractual obligations, including foreign currency loans and advances extended to individuals and non-exporting companies, will remain denominated in foreign currency.

He said the transition would therefore not alter the legal status of existing financial contracts.

The position mirrors provisions contained in the National Development Strategy 2, which states that contractual obligations entered into before the final transition date, including bank loans and advances, will continue to be honoured without loss of value to economic agents.

Dr Matshe explained that while domestic goods and services would ultimately be priced and settled exclusively in local currency under the mono-currency system, this would not require Zimbabweans to convert their foreign currency savings.

Instead, account holders would continue to access their FCAs through an integrated banking system.

He said consumers lacking sufficient local currency at the point of sale would be able to authorise the transfer of funds from their foreign currency accounts into local currency to complete transactions.

"The only time that those balances will be exchanged for local currency is when and if the holder of that account wants to do so," he reiterated.

Dr Matshe said the central bank's broader objective is to build confidence in the ZiG by maintaining macroeconomic stability through disciplined fiscal and monetary policies.

He said growth in money supply is being carefully managed in line with inflation and economic growth targets to avoid destabilising the currency.

The Deputy Governor also said the Reserve Bank's foreign reserves currently provide full backing for ZiG reserve money as well as banking sector deposits, strengthening the country's ability to absorb external economic shocks.

The remarks are intended to address lingering concerns among businesses and investors over the treatment of foreign currency assets during Zimbabwe's eventual transition to a mono-currency system.