THE African Development Bank (AfDB) says stability of Zimbabwe’s currency and the halting of central bank quasi-fiscal activities are critical in ensuring the country’s macro-economic stability.
On 5 April, the apex bank introduced the Zimbabwe Gold (ZiG), the country’s new currency which effectively replaced bond notes and the RTGS.
According to Statutory Instrument 60 of 2024, ongoing ZiG value shall be “deter- mined by the inflation differential bctwcen ZiG and the United States dollar inflation rates and the movement in the price of the basket of precious metals (mainly gold) and valuable minerals held as reserves by the Re- serve Bank.”
The regional lender in its economic out- look for member state says slower GDP growth of 2.0% is projected for 2024, mainly on account of below average agricultural output due to the El Nino weather phenomenon.
“Mining output is also expected to remain subdued because of lower international mineral prices. Inflation is projected to average 24.9% in 2024 as the exchange rate stabilises,” the AfDB says.
“The downside risks are elevated due to drought caused by El Nińo weather patterns that has affected the agriculture sector, while unstable international commodity prices pose further risks to the mining sector.
“Maintaining ZIG exchange rate stability and climinating the quasi-fiscal operations of the RBZ and transferring allits liabilitics to the Treasury could underpin macroeco- nomic stability.”
After the launch, the authorities resorted to command economic measures including Gestapo tactics in a desperate bid to defend the shaky local unit buffeted by weak macro-economic fundamentals and lack of confidence.
While the authorities claim ZiG is backed by US$100 million in foreign exchange and 2.5 tonnes of gold valued reserves US$185 million, they have been running around in panic mode to defend the currency.
Some of the rigid controls they have imposed in the market include a practically fixed exchange rate, aggressive mopping up of liquidity through market instruments, low bank withdrawal limits and virtual price controls.
– STAFF WRITER.
