Business
Big ‘No’ to quasi-fiscal activities: RBZ governor
But according to analysts true economic recovery was also being derailed by corruption, mismanagement, and a lack of transparency
IN A bid to restore price and currency stability the new Reserve Bank of Zimbabwe (RBZ) governor John Mushayavanhu, yesterday declared that the apex bank will not deviate from its core functions by engaging in quasi-fiscal operations.
Dr Mushayavanhu was announcing his first Monetary Policy Statement (MPS) at which he launched a structured currency for the country.
“I do not believe in quasi-fiscal activities. It is not going to happen under my watch. My mandate as spelt out in the Reserve Bank Act is very clear and I have no intention to do other people’s jobs. I will do my job as the central bank governor as defined in the RBZ Act,” he said.
The 2024 MPS comes amid a sharp depreciation of the local currency that forced the economy to redollarise.
For a long time quasi-fiscal operations have been blamed for increasing money supply which triggers inflation.
But according to analysts true economic recovery was also being derailed by corruption, mismanagement, and a lack of transparency.
In a bid to inspire confidence through transparency he said ZiG will be backed by US$285 million in reserve funds held by the RBZ, namely, 2 522 kilogrammes of gold worth US$185 million and foreign currency of US$100 million.
“A structured currency is generally defined as a currency that is pegged to a specific exchange rate or currency basket and backed by a bundle of foreign exchange assets, potentially including gold,” Mushayavanhu said.
“This means a central bank can only issue domestic notes and coins when fully backed by a foreign reserve currency or foreign exchange assets and that the currency is fully convertible in the reserve currency on demand.”
He said that currently the entire local currency reserve is ZWL$2,66 trillion and requires full cover of gold and cash reserves equivalent to US$80 million.
Banks were ordered to convert the current Zimbabwe dollar balances into the new currency which shall be called Zimbabwe Gold (ZiG) to foster simplicity, certainty, and predictability in monetary and financial affairs.
Citizens will use the official US$/ZWL$ and US$/ZiG exchange rates on any given day during the 21 days to convert their ZWL$ balances to ZiG.