Payment of contractors does not influence exchange rate volatility: Mushayavanhu

Source: The Herald – Breaking news.

Payment of contractors does not influence exchange rate volatility: Mushayavanhu 
Dr Mushayavanhu said the ZiG was not only strengthening but moving towards stability. 

Africa Moyo in HARARE and Ray Bande in MUTARE

THE volatility in black market exchange rates is not influenced in any way by payment of contractors, civil servants or food imports, Reserve Bank of Zimbabwe Governor Dr John Mushayavanhu said yesterday, as the apex launched the second phase of awareness campaigns for the new structured currency, the Zimbabwe Gold (ZiG).

Responding to questions during a Zimbabwe National Chamber of Commerce breakfast meeting in Mutare, Dr Mushavanhu said: “Contractors are paid by Government mostly in US dollars. If they are paid in ZiGs, it is from the stock of ZiGs in the market and not from printing. 

“Treasury cannot come to borrow to pay contractors. If they are using money that is already in circulation, which is controlled, I do not see how that can cause ripples.

“As regards food imports, in our semi dollarised economy, 80 percent of transactions are in US dollars. What it means is that, for you and me in this room, our food requirements, even if it is going to be imported, it can be done by the private sector. 

“National Foods can use money in their FCA to import, mill and sell it to you in US dollars because we are in a multi-currency system.

“Then we come to the vulnerable, yes those ones are covered by Treasury. For those we are not looking at a lot because maybe 500 000 tonnes will suffice and Treasury will tell you that it has already been secured. Yes, El Nino is there but its impact on the exchange rate, or its impact on ZiG is minimal.”

Dr Mushayavanhu said the ZiG was not only strengthening but moving towards stability. 

“ZiG is a new currency fully backed by gold and other precious minerals. We are projecting that ZiG is going to be stable. The exchange rate is not going to move. In fact, if you look at what has been happening from April 5, ZiG has been strengthening. 

“Some might want to think that there has been firming because of the RBZ. But no it is not. It is the market and of course the market has been influenced by the price of gold that has been going up, which means ZiG should naturally strengthen because the major anchor of ZiG is gold. That is not because the central bank has said anything,” he said. 

The Reserve Bank Governor said fuel pricing in ZiG was being negotiated with suppliers and the outcome of the meetings will soon be made public. 

Fuel has almost entirely been sold in US dollars in recent years, largely because it is imported using free funds, rather than funds bought from the Reserve Bank or the commercial banks under the new system. 

“On the issue of ZiG buying petroleum products, we are currently seized with negotiations with players in the industry to have that happen. But we should also be aware those players in that industry are also corporate citizens, come June they also have to remit their QPDs (Quarterly Payment Dates) in ZiG,” said Dr Mushayavanhu.

Meanwhile, the RBZ has, with immediate effect, launched the second phase of awareness campaigns of the ZiG, targeting all parts of the country after realising that some communities had been left out.

 Dr Mushayavanhu said after the April 5 launch of the new currency, which is backed by gold and other precious minerals, the conversion of what used to be RTGS balances into ZiG was completed, while an intensive media campaign under phase one was initiated to “try and educate the public on ZiG and also on the structured currency”.

“However, as we were doing the rounds, the message that kept coming to us was ‘we were not going far enough’; we were not reaching all the corners of the country and the people out there are asking what is ZiG? What is a structured currency? What difference is it going to make? How different is it from the RTGS?” said Dr Mushayavanhu. 

“Are we not doing the same things over and over again and expecting different results, but without changing anything?

“And arising from that, we felt it necessary that we embark on an extensive and intensive campaign to try and educate the public on this new structured currency.”

In the second phase of awareness campaigns, the RBZ has joined forces with the Ministry of Information, Publicity and Broadcasting Services and Parliament of Zimbabwe, “so that we reach every corner of the country”.

Dr Mushayavanhu explained that they chose the Ministry of Information because it has got the reach of the whole country through the media, and Parliament because legislators represent the people.

“And if you go through the Members of Parliament, you will be able to reach all corners of the country and also these are the people who were elected by the people and they can guide us and help us to spread this message.

“So we are embarking on this campaign starting immediately,” he said. 

The teams going out to the districts and villages are mandated to conscientise the people of the new currency, ZiG, which replaced the Zimbabwe dollar as legal tender but will co-circulate with other foreign currencies since Zimbabwe remains in a multi-currency regime, that is expected to last until 2030, as enunciated in Statutory Instrument 218 of 2023 and the National Development Strategy 1 (NDS1). 

In short, the objectives of the awareness campaigns are to inform the public about the introduction of the ZiG, advise the public of the transition window from the Zimbabwe dollar to ZiG, where the central bank said people would be allowed to exchange their old notes for ZiG and during this process, Zimbabwe dollar notes would continue to be legal tender. 

The public will also be advised of the mechanism that was used to convert their balances from Zimbabwe dollars to ZiG, and to also advise the public on the exchange of notes from Zimbabwe dollars to ZiG and where they can exchange their notes. 

In the Monetary Policy Statement, Dr Mushayavanhu said he had dedicated AFC Commercial Bank and POSB as institutions that would give cash to people who wanted to exchange their Zim dollar notes for ZiG notes and coins.

The public will also be educated on the ZiG denominations and features. 

From what was announced on April 5, what has changed is that ZiG 1 to 5, will now be coins and then have ZiG 10, 20, 50, 100 and 200 as notes, because for instance, 1 ZiG is equal to about US$0,6c at the prevailing exchange rate.