WATCH: ZiG exchange rate to continue to be market-determined: RBZ Governor

Judith Phiri, Business Reporter

THE Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mushayavanhu has said since its introduction, the new currency, ZiG’s exchange rate has been market-determined and will continue to be based on the demand.

The RBZ adopted a market-determined system for setting exchange rates, with the auction system being replaced by a refined interbank foreign exchange market through which the commercial banks buy foreign currency from willing sellers and sell it to willing buyers, with the margins far lower than in the black market. The weighted average of the rates at each bank form the interbank rates.

Speaking at the Unpacking of the Monetary Policy Statement Breakfast Meeting at the Zimbabwe International Exhibition Centre (ZIEC) in Bulawayo on Wednesday, Dr Mushayavanhu said he was confident that the ZiG would turn the tables against the black market, as the new local currency would not budge to the US dollar.

He allayed fears that the ZiG is now taking a battering from the US dollar, saying it is a matter of time before those with ZiG will start controlling the prices.

“The exchange rate of ZiG to other currencies is going to be market determined and this is what has been happening from the 8^th of April when ZiG started trading up to now. The banks have been quoting bids and offer rates based on demand from their customers from the market and the exchange rates that you have seen have not been influenced at all by the central bank or by the price of gold,” he said.

“In fact, what we are doing as the Central Bank is that in the background we are running a scenario where we are saying for any particular day what is the gold implied exchange rate and what is the reserve basket implied exchange rate. We are watching what is happening in the market and you will be pleased to know that there is not much disparate between what we are seeing happening under the gold-determined exchange rate and basket-determined exchange rate there is a difference but not much.”

Going forward, he said the exchange rate will continue to be market-determined based on supply and demand, while when the demand for ZiG increases it may be inevitable that ZiG will continue to further strengthen.

Dr Mushayavanhu said like any Central Bank, from time to time they will intervene if they see that the exchange rate starting to go out of tandem.

Two weeks after its official launch, ZiG remains stable with major business players and consumers across the country smoothly conducting transactions following the successful conversion of Zimbabwe dollar balances, amid marginal gains against the United States dollar.

Coming from a background of wild exchange rate volatility, price escalation and speculative market, the new currency is promising to reverse the tide as monetary authorities maintain the multicurrency regime, while paving the way for de-dollarisation in the long-term.

The ZiG replaced the inflation-hit Zimbabwe dollar, which had fallen to around $33 000 against US$1 on the interbank market and traded above $40 000 to US$1 on the parallel market.

ZiG notes will be available in denominations of 1, 2, 5, 10, 50, 100, and 200, with half and quarter ZiG coins from 30 April.