- High Demand for USD: Essential services, including rentals, fuel, and passports, are predominantly priced in US dollars, leading to diminished demand for the ZiG
- Central Bank Intervention: The central bank injected $190 million into the market to stabilize exchange rates
- Call for Currency Reforms: To stabilize rates, the government should allow essential services currently mandated to be paid in USD to be paid in local currency
Harare- Central Bank has injected US$190 million into the market since the inception of ZiG to stabilize the exchange rate madness and maintain economic stability.
This move is part of a broader strategy to curb the volatility that has seen the premium on the US dollar surge to an alarming 74% in August.
Persistence Gwanyanya a member of the monetary policy committee said at the outset, there was little need for intervention when the ZiG was launched. However, as volatilities emerged, indicating a reduction in dollarization from 85% to 60% in the economy, the central bank had to step in.
In July, RBZ injected US$50 million into the market to meet demand for dollars using proceeds collected from exporters.
The Zimbabwe Gold-backed currency (ZiG) is trading at 13.87 per dollar, while the street rate stands at 24.
This disparity highlights a significant challenge: essential services, including rentals, fuel, and passports, are predominantly priced in US dollars, diminishing the demand for the ZiG.
This erodes confidence in the local currency.
In its HY24 performance, Tigere Property Fund collected 91% of its rental income in USD, up from 72% last year.
Such statistics reflect growing skepticism about the viability of the ZiG, particularly as Zimbabweans have relied on US dollars for everyday expenses since the hyperinflation crisis that began in 2009.
The government's failure to create a balanced economic environment, where fundamental services can be paid for in both local and foreign currencies, complicates the situation.
The current functioning of the ZiG resembles the trajectory of the Zimbabwean Dollar (ZWL), which ultimately collapsed due to similar issues.
Without implementing sound reforms that enhance the credibility of the currency and stabilize the economy, the ZiG risks following a path toward obsolescence.
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