Zim plots asset-backed plan to bolster Zimdollar
GOVERNMENT is considering a currency reform structure where the exchange rate will be linked to a hard asset like gold as part of measures to buttress the local currency.
This comes on the back of a sharp depreciation of the Zimdollar with President Emmerson Mnangagwa recently hinting of a structured currency reform programme.
Zimbabwe has a history on inconsistency when it comes to currency policies with people having lost millions of dollars due to reforms of over the years.
Responding to questions from journalists during a Press conference ahead of the United Nations Economic Commission for Africa conference of ministers slated for end of this month, Finance minister Mthuli Ncube said the structure which government was working on was meant to stabilise the domestic liquidity.
“Going forward we want to ensure that the growth we have achieved so far is maintained and even increased and we can only do that if we have further enhanced stability in the domestic currency. So the idea is to make sure that we manage the growth of liquidity so that it is in correlation with money supply growth and inflation. The way to do that is to link the exchange rate to some hard asset such as gold but this is a structure that we are still working on,” he said.
“We will have a currency board where the growth of domestic liquidity is governed by the value of the asset that is backing the currency in the first place. That is what was meant by the President but the work is ongoing in terms of how to really structure it and an announcement will be made in the fullness of time.”
Zimbabwe’s plans for a currency reform structure comes as the United States dollar has become the unit of choice, accounting for over 80% of the transactions amid calls for the redollarisation of the economy.
However, government insists that the local currency is here to stay.
Ncube said the policy forward guidance which President Mnangagwa announced was meant to ensure Zimbabwe was on a path to further enhance its currency reform system in a quest for currency stability.
“We believe it will provide a lasting solution to currency volatility,” Ncube said.