‘ZiG will stabilise interest rates, investment markets’

Business Reporter

WITH the advent of Zimbabwe Gold (ZiG), citizens will begin to witness lower interest rates, as well as stable stock and asset markets, according to Treasury.

Responding to questions in Parliament recently, Finance, Economic Development and Investment Promotion Minister Prof Mthuli Ncube said the new currency is here to stabilise the economy and markets.

He explained: “What is going to happen is as follows: With the introduction of the new currency — ZiG, you will notice that the volatility in terms of prices and the currency itself is going to change, and that volatility is going to come down sharply.”

Dr Prosper Chitambara, an economist, weighed in on the implications.

“The introduction of ZiG is a bold move aimed at tackling the rampant inflation and currency volatility Zimbabwe has faced in recent years,” he said.

“Lowering interest rates and stabilising asset markets are critical steps towards restoring investor confidence and fostering sustainable economic growth.”

Mr Raymond Madziva, a banker, echoed similar sentiments.

“A stable currency coupled with lower interest rates will incentivise investment in productive sectors of the economy,” he said. “This will spur job creation and stimulate economic activity, ultimately benefiting the livelihoods of ordinary Zimbabweans.”

With this measure now online, it will go a long way in stabilising all prices, including asset prices, being the stock market prices.

“So, the currency change in the first place is one such factor that will impact positively on equity price volatility. Hon (Energy) Mutodi mentioned the issue of interest rates. It is certainly true that interest rates are high,” he added.

The Reserve Bank of Zimbabwe has since adjusted borrowing interest rates from record highs to 20 percent, and the hope is that they will keep them there for a long time, inflation permitting.

“Now, with the introduction of the new currency framework, we have seen interest rates also drop from an average of 130 percent down to 20 percent in terms of the policy rate as a guiding rate,” the minister said.

Therefore, the interest rate change will also go a long way in creating stability in asset prices.

“There are also certain rules that were put in place such as having to buy and hold for a while for selling to restrict any speculative behaviour in the equity market.

“We are reviewing those rules and will make announcements once we have completed our review to make sure that we restore the efficient functioning of this capital market,” he concluded.

Dr Chitambara applauded the Government’s proactive approach.

“The willingness to adapt and refine policies demonstrates a commitment to addressing the underlying challenges facing Zimbabwe’s economy,” he commended.

Mr Madziva expressed optimism about the future.

“With the right policies and continued efforts towards reform, Zimbabwe has the potential to emerge as a stable and prosperous economy,” he remarked.