Source: RBZ expects wider use of ZiG for transactions | The Sunday Mail
Debra Matabvu and Golden Sibanda
CONTINUED stability of Zimbabwe Gold (ZiG) is expected to lead to more transactions being conducted in the local currency, including for fuel sales, as the market begins to warm up to its use as a store of value and reliable medium of exchange, the Reserve Bank of Zimbabwe (RBZ) has said.
Since the introduction of ZiG last year, some transactions, such as passport fees and fuel purchases, have been solely in US dollars, as the Government sought to ensure price stability and prevent volatility in critical sectors while the local unit gained market confidence.
Monetary authorities believe there will be wider acceptance of ZiG in key economic sectors.
Local currency transactions account for about 35 percent of all settlements in the economy, representing an increase from around 15 percent last year.
RBZ Governor Dr John Mushayavanhu said the transition to wider ZiG usage would be gradual.
“The Reserve Bank believes in a gradual and market-driven approach to de-dollarisation that will ensure the country gradually and sustainably transitions to a monocurrency regime by 2030,” Dr Mushayavanhu said.
“In this regard, gradual and incremental but notable milestones should be achieved along the way. The gradual approach will ensure that no disruptive shocks are introduced to the economy, which may result in bank runs and reversal of the anticipated gains from de-dollarisation.
“As such, currency stability should underlie the de-dollarisation process. Country experiences have amply shown that sustained price stability is the single most significant precondition for successful de-dollarisation.
“The rising proportion of ZiG-denominated transactions in the national payment system and the proportion of ZiG deposits held by banks is a step in the right direction.
“The Reserve Bank expects this to continue as long as the currency remains stable, with additional transactions currently exclusively in USD, such as fuel, also slowly coming on board in due course.”
Increase in ZiG transactions and deposits, Dr Mushayavanhu added, signals confidence and acceptance of the local currency by the market.
“In addition to the physical form of ZiG, the Reserve Bank has also noted a substantial increase in ZiG-denominated transactions on the national payments system, across all the payment streams,” he said.
“In addition, the proportion of ZiG deposits held by banks also increased from less than 10 percent before the introduction of ZiG to current levels of around 15 percent.”
The central bank also says the new regulations, which stipulate that 50 percent of quarterly payment dates (QPDs) should be in the local currency, had also pushed demand for ZiG.
“This is a testament of the various measures being put in place by the Government, which include the introduction of QPDs, and this has resulted in more businesses accepting the local currency,” said economist and member of the RBZ’s Monetary Policy Committee Mr Persistence Gwanyanya.
Low inflation
Meanwhile, Zimbabwe’s monthly inflation rate is forecast to remain low, anchored by a tight monetary policy stance and stable exchange rate.
In a statement last week, the MPC said the ZiG monthly inflation decelerated from 10,5 percent in January this year to 0,5 percent in February and 0,1 percent in March.
Food inflation stood at minus 0,5 percent, while non-food inflation was 0,2 percent in March.
“In line with the continued monetary and exchange rate stability, monthly ZiG inflation is expected to remain low and stable in the outlook period,” said the central bank.
The RBZ maintained the bank policy rate at 35 percent.
It also resolved to strengthen its monetary policy communication through regular updates.
This is expected to enhance transparency, build confidence and engender certainty and predictability in the economy.
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