Zimbabwe’s new currency, the Zimbabwe Gold (ZiG), firmed against the United States dollars for 10 days running from 4 November but people still do not have confidence in the local currency.
Justice Minister Ziyambi Ziyambi said this is clearly demonstrated by the fact that inflation is going up when the ZiG is backed by foreign reserves of $430 million,which translates to an exchange rate of ZiG23:1 but there was no inflation at all in 2009 when the country switched to the US dollar but did not have any reserves.
The ZiG was introduced in April at about ZiG13:1 and was devalued on 27 September to nearly ZiG25:1 after the black market had rocked to as much as ZiG50:1.
The black market is down to ZiG35-40:1 but the official rate has risen from 28.6829 on 1 November to 25.2844 yesterday.
Ziyambi said the government was working on several measures to restore confidence in the new currency and Finance Minister Mthuli Ncube will give a detailed explanation when he presents his 2025 budget on 28 November.
Here is Ziyambi’s full response to questions raised in the Senate on Thursday.
HON. SEN. TONGOGARA: Thank you Mr. President. My question was supposed to be directed to the Minister of Finance but there are two leaders in the House here and one of them can answer it. How does the Ministry of Finance intend to balance inflation control
with economic growth, especially as inflation continues to devalue the local currency impacting citizens purchasing power?
THE MINISTER OF JUSTICE, LEGAL AND PARLIAMENTARY AFFAIRS (HON. ZIYAMBI): I want to thank the Hon. Member for the question. It is a very long one and it would need the Minister to come and elaborate. I am sure during the budget session, the Minister will explain some of the issues. I will explain a few issues. The issue that we suffer from as a country is largely a question of confidence. Our people do not have confidence in our currency and there is a lot of speculation. Why do I say so? This is because when we introduced the ZiG, we backed it up with gold currency and currently in the circulation, we have around ZiG10.6 billion and we have in our reserves around USD430 million. If you do the mathematics, the rate should not be above ZiG25. In fact, when we did the mathematics and we said suppose we want to buy all the ZiG that is in circulation with USD430 million, what rate will we get it for? We found out that it was around ZiG23, yet you find that because of the confidence, people would then speculate and say I would rather have as a store of value and keep my USD even if I buy it at ZiG30. The inflation that you are talking about, you will not find it in any economic books. It is a Zimbabwean inflation caused by lack of confidence, which is what we need to do to build the confidence.
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