New notes to strengthen ZiG gains: Experts

Source: New notes to strengthen ZiG gains: Experts – herald

Richard Muponde

Zimpapers Politics Hub

THE new series of ZiG notes, which start circulating next Tuesday, will consolidate gains by the local currency and enhance its competitiveness against major currencies.

Reserve Bank of Zimbabwe Governor Dr John Mushayavanhu recently announced in his Monetary Policy Statement that the new ZiG notes would start circulating on April 7, marking a significant milestone in the country’s ongoing currency reforms.

Economists say the timing of the roll-out is critical, coming at a period when inflation has remained in single digits and monetary authorities have maintained tight liquidity management.

The ZiG has also benefited from growing foreign currency reserves and a convergence between the parallel and official exchange rates, reinforcing confidence in the domestic currency.

Economic analyst, Mr Titus Mukove, said the upgraded notes were expected to consolidate the ZiG’s gains.

“The introduction of the new banknotes is expected to strengthen the ZiG’s position against the United States dollar, particularly in the context of global shocks and volatility,” he said.

“This optimism is anchored on the current macro-economic stability, which includes single-digit inflation and a convergence between the parallel and official exchange rates.

“The Reserve Bank has maintained tight monetary policies, and this consistency has helped stabilise the currency. The growth in foreign exchange reserves further supports ZiG’s resilience, enabling it to absorb external shocks.

“In my view, the sustainability of this stability is highly likely, given the market-driven exchange rate and genuine demand within a liberalised system.”

Mr Mukove said the mechanism of exchanging electronic balances for physical cash without increasing reserve money was critical in maintaining monetary discipline.

“This approach helps mitigate inflationary pressures, which is essential given the country’s history with inflation,” he said. “Public confidence is also improving, as evidenced by increased adoption of the ZiG in transactions and its growing acceptance as a medium of exchange.

“The enhanced security features and durability of the new notes will further strengthen trust in the currency. If fiscal discipline is sustained and foreign exchange inflows continue to grow, the ZiG will remain on a stable and upward trajectory.”

Monetary Policy Committee member and economist, Mr Persistence Gwanyanya, said the rollout of higher denomination notes reflects broader macroeconomic stability and growing market confidence in the country’s monetary policy framework.

“The introduction of higher denomination ZiG banknotes coincides with a period of pronounced macroeconomic stability,” he said.

“Renewed market confidence, underpinned by demonstrable credibility of the monetary authorities, is expected to support the acceptance of the upgraded ZiG notes for both transactional efficiency and store-of-value functions.

“The timely issuance of upgraded notes addresses critical concerns regarding the quality and durability of the existing currency series, signalling a strong policy commitment to the longevity of the ZiG regime.

“Furthermore, the Reserve Bank has executed an effective pre-launch communication strategy, which is instrumental in enhancing public acceptability and reducing information asymmetry.”

Mr Gwanyanya said the market sentiment indicated a willingness to engage with the monetary authorities, notwithstanding historical inflationary experiences.

“The authorities have demonstrated capacity to mitigate volatility through prudent monetary policy, as reflected in the marginal inflation increase to 4,4 percent year-on-year for March,” he said.

“This stability is a result of disciplined management of monetary aggregates, with money supply growth kept below one percent per month.

“The roadmap to a mono-currency system, now tied to clear conditions rather than timelines, also strengthens confidence by avoiding premature policy shifts. With foreign exchange reserves reaching about US$1,2 billion, the foundation for ZiG convertibility is steadily being built, despite global geopolitical risks.”

Dr Mushayavanhu said the new banknotes would work side-by-side with those already in circulation.

“We have the ZiG10 and ZiG20 notes in the system. We’re going to introduce new notes; they will circulate side by side,” Dr Mushayavanhu explained.

“When that money comes to the banking system, banks are expected to take the old notes and bring them to the central bank. We will destroy the old notes and give them value in new notes. So, it is going to be ZiG10, ZiG20 and ZiG50. The ZiG100 and ZiG200 notes will be introduced as and when the RBZ sees fit.”

The central bank emphasised that the introduction of the new notes will be demand-driven and not inflationary, as banks will exchange electronic balances for physical cash without increasing reserve money, a move designed to safeguard price stability.

The new notes come against the backdrop of global economic uncertainty, mainly brought about by the Middle East conflict in which the United States and Israel are bombing Iran.

President Mnangagwa has already called for diplomacy to resolve the crisis, which has caused fuel price increases and shortages in many countries, including Sri Lanka and Philippines.

The war has disrupted supply chains and heightened inflationary risks worldwide.

Despite these external pressures, Zimbabwe’s monetary authorities have maintained a firm grip on inflation.