ZCTU concerned about government currency measures

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By Tapiwa Svondo

The Zimbabwe Congress of Trade Unions (ZCTU) has raised concerns over currency measures recently announced by RBZ governor John Mushayavanhu.

In a press statement released Tuesday, the ZCTU expressed doubts about the effectiveness of these measures on how they are going to improve the economy.

“The 2024 Monetary Policy Statement (MPS), unveiled by the new Reserve Bank of Zimbabwe (RBZ) Governor, Dr. John Mushayavanhu on Friday, April 5, 2024, comes at a time when the country’s economy has been facing severe macroeconomic instability, characterized by significant depreciation of the local currency and chronic high inflation. This inflationary pressure is a result of both volatile exchange rate developments and unsustainable growth in the money supply,” Japhet Moyo, Secretary General of ZCTU.

ZCTU also questioned the high inflation on the local currency that Zimbabwe is experiencing as this shows no confidence in the currency.

“Confidence in a currency is closely related to inflationary developments and the trust placed in the managing institution. The chronic high inflation experienced in Zimbabwe has eroded the value of the local currency and resulted in a significant loss of confidence among economic agents.

“The ZCTU highlights that the unsustainable growth in the money supply and the consequent depreciation of the local currency have been major contributors to the chronic high inflation,” said Moyo

The trade unions critiqued the readiness of RBZ reserves in supporting the ZiG.

“Reserves play a crucial role in supporting a country’s currency by providing liquidity, stabilizing the exchange rate, and maintaining confidence in the economy. The current reserves held by the RBZ, amounting to US$100 million in cash and 2,522 kilograms of gold (equivalent to US$185 million), might be grossly inadequate to fully back the local currency component of reserve money, which stands at ZW$2.6 trillion, requiring US$90 million in gold and cash reserves. The country would ideally need import cover of up to US$4.3 billion to sustain the ZiG, based on the Southern African Development Community (SADC) convergence criterion, which specifies up to six months of imports. Therefore, the ZCTU raises concerns about the adequacy of the current reserves to support the ZiG,” said Moyo.