CZI confident gold currency will ease excessive US$ demand

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By Alois Vinga

THE Confederation of Zimbabwe Industries (CZI)  is optimistic the recently introduced Zimbabwe Gold (ZiG) currency will go a long way in easing excessive demand for the US$ in the economy.

Described as a game changer by experts supporting the cause, the gold-backed digital token was incepted in April this year as one of the first digital currencies to be introduced by the country’s central bank.

Following the initiative, the Reserve Bank of Zimbabwe (RBZ) announced that Zimbabwe Gold (ZiG), a digital token backed by gold, will be considered legal tender in the country with effect from October 5, 2023.

The central bank said local banks will maintain dedicated ZiG accounts and intermediate transactions in ZiG the way they maintain intermediate transactions in local and foreign currency.

Among other characteristics, the applicable intermediated money transfer tax (IMTT) will be half of the IMTT applicable to transactions in foreign currency on the instrument which can be used as a means of payment for domestic transactions, over and above its value-preservation purpose.

Presenting the latest economic and inflation tracking report, the industry lobby group, CZI said ZiG has the double potential to shore up the ZWL and at the same time ease demand around the US$.

“Given that the market was relegating the ZWL$ towards the periphery, ZIG can be the way out towards our currency, which is stable if the confidence issues are addressed.

“If ZIG is well managed, being backed by actual gold and a market determined exchange rate as influenced by the price of gold, the demand of USD as a store of value might subside in the Zimbabwean economy,” said the CZI.

Experts also believe that coming on board of the instrument will present an investment alternative to the markets as opposed to the conduct of chasing after the US$ which has become rampant in the economy, and also often leaves a trail of destruction by depreciating the exchange rates.

A fortnight ago, RBZ governor, John Mangudya revealed that since its inception, the use of ZiG has been embraced widely in the economy with its continued dual use as a value-preserving instrument.

“ZiG as a medium of exchange in the economy will go a long way in supporting digitisation, financial inclusion, and the overall stability of the local currency.

“The MPC will remain alert to attend to any emerging risks, emanating from both the domestic and international fronts, in its commitment to ensuring stability in the exchange,” he said.