New currency: We owe a huge debt to posterity

07 Apr, 2024 - 00:04 0 Views
New currency: We owe a huge debt to posterity

The Sunday Mail

On Friday, the new Reserve Bank of Zimbabwe Governor, Dr John Mushayavanhu, said all the right things as the nation anxiously waited to hear how the monetary authorities planned to arrest runaway prices, which were being driven by a volatile exchange rate.

There were also anxieties on expectations of a new currency.

But unveiling a new currency, ZiG, necessarily meant there would be follow-up questions on how its value was going to be preserved, particularly considering our past experiences.

“We have learned from the past that it does not help to print money. Certainly, not under my watch,” he assured.

“I have said in a previous meeting that if printing money could make nations prosperous, then there would be no nation which is a Third World nation.”

He also indicated that the exchange rate had been liberalised and would henceforth be determined by the market.

“You would have noticed that from January 2024, the central bank has allowed the exchange rate to be determined by market forces. And we have been watching because that is what you have asked for in the past, and we say there you have it,” added the new central bank chief.

This is big, if not welcome, news for a market that had long clamoured for the exchange rate to be liberalised.

But quite helpfully, the new currency will be backed to our gold reserves, which, thankfully, have been gradually building up ever since President Mnangagwa made a directive for mineral royalties to be paid in kind.

Zimbabwe now boasts over 2,2 tonnes of gold worth a whopping US$185 million.

Critically, this amount on its own is enough to give the RBZ the wherewithal to defend the new currency.

It is important to note that the stock of Zimbabwe dollars that we had in the economy before the latest Monetary Policy Statement amounted to $2,6 trillion, which translated to about US$90 million.

So, hypothetically, the apex bank would have been able to effortlessly mop up all the local currency in the economy.

Remember, in addition to driving local economic activities, one of the reasons for reintroducing the local unit was to give the apex bank power to set the country’s monetary policy.

And ever since we reintroduced our own currency in 2019, we have seen how this has lifted performance in industry, where capacity rose to about 66 percent.

It also gave consumers buying power, which drove spending and economic activity.

Local products also began to dominate in local retail outlets.

But the periodic episodes of instability remained a cause for concern.

Indeed, as a structured currency that is backed to gold, there is no conceivable way the ZiG could be volatile.

Most of the emerging economies around the world are moving towards building their gold reserves, as it will guarantee the future value of their currencies.

So, the RBZ should stay true to the promises that it made to Zimbabwe.

The need for discipline cannot be overemphasised.

Equally, Zimbabweans owe it to themselves to play their part to ensure the longevity and utility of the new currency.

Everyone has a role to play.

During the previous dispensation, the Government bended over backwards to accommodate business, with more than US$4 billion extended at concessionary rates through the foreign currency auction system.

While business was able to retool, there were worrying allegations of abuse of the auction system by some players.

As we move forward, we need to be wary of all these self-defeating shenanigans.

We need to protect the value of the new currency by and at all costs.

We have lived under sanctions for far too long that sometimes we think they no longer exist when, in fact, they are still extant.

Again, this means we have to be watchful.

But ZiG, as the new medium of exchange, is not an end in itself, but part of a continuum of the currency reforms initiated by the Second Republic.

The journey continues.

Encouragingly, Zimbabwe is currently performing better relative to other countries in the region.

For example, data from the Zimbabwe National Statistics Agency shows that we generated more than US$644 million from exports in February alone.

Suffice to say, our economic fundamentals are strong enough to support a stable currency.

We owe it to posterity to do everything in our power to defend our new currency.

Share This: