By A Correspondent| The Zimbabwe Coalition on Debt and Development (ZIMCODD) has said the introduction of a new currency by the Reserve Bank of Zimbabwe has potential to succeed if the measure is implemented transparently and accountably.
In a statement, ZIMCODD believes that anchoring ZiG with reserve assets could offer a lasting solution to Zimbabwe’s currency woes, fostering industrial production, employment creation, price stability, and poverty reduction.
According to RBZ, ZiG replaces the Zimbabwe dollar (ZWL) as legal tender, circulating alongside other currencies like the USD. The currency conversion process involves utilizing the global price of gold and the ZWL interbank rate. With reserves totaling US$285 million, including gold and foreign currency holdings, the RBZ aims to maintain the stability of ZiG’s value.
“It means that from now on, ZiG’s money supply growth will only be limited to the growth of RBZ’s reserve asset holdings, ceteris paribus. So, hypothetically, this arrangement could restrict the ability of authorities to print ZiG willy-nilly. If this holds, the gold-backed ZiG will become a stable currency, thus clamping ongoing rapid dollarization of the economy.
“Generally, gold is considered a safe haven investment during downturns and financial crises because of its long history of use as a store of value. Its properties are helping it achieve this status: malleability, portability, aesthetic appeal, virtual indestructibility, universal acceptance, liquidity, and rarity,” said ZIMCODD.
However, the organisation raised concerns about potential challenges, such as illicit gold trading, which could undermine the accumulation of reserves critical for supporting ZiG’s value.
They stressed the importance of adopting advanced technologies for gold production tracking and monitoring to prevent such leakages.
ZIMCODD called for a comprehensive approach to address economic vulnerabilities, including potential spending pressures on the Treasury amid adverse conditions like global commodity price fluctuations and climate-induced droughts.
They cautioned that any increase in ZiG’s money supply must be supported by sufficient gold reserves to avoid devaluation.
The organization also called for independent audits of gold and USD reserves backing ZiG to build public trust and investor confidence, warning against repeating past mistakes, citing the rejection of bond coins and notes due to discrepancies between issued currency and reported reserves.
To ensure the success of ZiG, ZIMCODD advocated for broader reforms encompassing economic, governance, institutional, and structural aspects.
They emphasized the importance of combating corruption, maintaining policy consistency, and fostering political will to implement robust reform agendas aimed at improving government efficiency and market competitiveness.