T
he Reserve Bank of Zimbabwe (RBZ) mid-term monetary policy released last Friday was silent on the elephant in the room, which is the depreciation of the newly introduced currency and its rejection by some businesses.
Zimbabwe ditched its currency in April after it lost value rapidly. It was replaced by the Zimbabwe Gold (ZiG), a currency that the RBZ said was backed by 2.5 tonnes of gold and foreign currency reserves worth about US$285 million.
Zimbabweans were assured that the currency would be stable because it was backed by minerals.
However, five months down the line, Zimbabweans are grappling with a familiar problem.
After the ZiG was introduced at a fixed rate of 13.5 to US$1, the currency’s value has dropped significantly on the commonly used parallel market where it is now trading at 28 to US$1.
Formal businesses are struggling to get foreign currency from the official market and this is taking a toll on many companies. A number of listed companies have been raising this issue in their published financial statements.
Hippo Valley, the country’s largest sugar producer, said while it had to sell its products in ZiG, suppliers of goods and services wanted payment in foreign currency.
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Across the country some businesses have started rejecting the ZiG as a form of payment because of its volatility. Some shops are now limiting customers in terms of the value of goods they can buy using the local currency.
To make matters worse, the ZiG is not available from banks and that suggests the RBZ was not fully prepared for the new currency roll-out.
In its mid-term monetary policy statement, the RBZ did not address the problems facing the ZiG.
Instead, the central bank said it was happy with the “general acceptance of the ZiG and will increase “injection of cash in line with demand” while making sure money supply growth “remains under check”.
What that tells us is that the authorities want to pretend that there is no problem with the new currency. Ordinary people are already bearing the brunt of the instability of the ZiG and the RBZ must be aware of those issues.
The shortage of the ZiG on the market must be addressed.
The RBZ says it is promoting a digital economy by drip feeding the financial system with the ZiG notes, but it is those that live on the margins that suffer.
Rising prices as a result of the currency movements is also another problem that the authorities need to attend to instead of hiding their heads in the sand like ostriches.
