Zimpapers Logo

Sikhulekelani Moyo, [email protected]

An economist has called on the Government to implement additional measures to drive the demand for Zimbabwe Gold (ZWG), saying that this will reinforce the prevailing economic stability.

This follows a series of bold policy measures announced by Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mushayavanhu in the 2025 Monetary Policy Statement, aimed at maintaining economic stability.

In his article titled “A Look into 2025 Monetary Measures,” Mr Persistence Gwanyanya underscored the need to strengthen ZWG’s convertibility and store-of-value attributes to sustain stability.

Mr Persistence Gwanyanya

He said the structured nature of the local currency, fully backed by foreign reserves in the form of foreign currency and precious minerals, enhances its credibility and convertibility.

At ZWG14,3 billion (US$550 million), foreign reserves provide more than three times the cover for the ZWG reserve money of ZWG3.5 billion as of 31 January 2025.

Mr Gwanyanya noted that foreign reserves have surpassed the total ZWG money supply in the economy, which provides added confidence in ZWG convertibility.

“As ZWG delivers on convertibility for foreign payments, market confidence will further boost its appropriateness for value preservation.

“However, in the absence of robust demand for ZWG, this alone is not enough to usher in permanent stability, which is key to restoring ZWG’s store-of-value function,” said Mr Gwanyanya.

To address this, he commended the Government for taking steps to drive ZWG demand, citing the introduction of income tax (QPDs) payments in a 50:50 ZWG/US dollar proportion in the last quarter of 2024 as a key policy shift.

“We expect the implementation of more measures to drive ZWG demand as the year progresses,” he said.

Zimbabwe Gold

While the demand for ZWG is important, Mr Gwanyanya said the supply of foreign exchange is equally vital for sustained stability.

He pointed out that Zimbabwe’s economy is structurally imbalanced, with foreign exchange holdings concentrated among a few large corporates and individuals. In this context, the recent reduction of foreign currency retention from exports — from 75 per cent to 70 percent — is in line with the country’s de-dollarisation roadmap.

“Reflecting the need to cushion exporters from possible exchange rate depreciation, the RBZ has provided an option for this constituency to invest the increased portion of five per cent in the USD-denominated deposit facility (USDDDF), which will be reassessed as needed and at the prevailing exchange rate,” said Mr Gwanyanya.

He said this is an improvement from investing the same in Treasury Bills (TBs), which expose exporters to exchange rate risk.

“While foreign exchange inflows have been increasing since 2019, with healthy balance of payments (BOP) positions recorded over the period, the trade deficit has remained significantly high, which could also explain the motivation to reduce the export retention ratio,” said Mr Gwanyanya.

Last week, the RBZ directed banks to increase interest rates on savings and time deposits while scrapping all charges for transactions valued at US$5 and below (or the ZWG equivalent).

Mr Gwanyanya believes these measures will encourage the wider use of the local currency and enhance confidence in the financial system.

He said the upward revision of deposit rates for both ZiG and US dollar savings and time deposits, along with the removal of transaction charges for small payments, is expected to improve public confidence in the banking sector and the ZWG. — @SikhulekelaniM1