Crisis, what crisis?

The Reserve Bank of Zimbabwe (RBZ) deputy governor , Dr Innocent Matshe , has made shocking  assertions that there is no  currency crisis in Zimbabwe.

This is in spite of the economy’s ongoing struggle with the  the local currency the  Zimbabwe Gold (ZiG)’s unrelenting  depreciating in value relative to all major currencies.

In addition to currency volatility, the economy is facing a number of additional issues, including high production costs, liquidity constraints, rising inflation, and shortages of foreign currencies.

He made these comments in response to business leaders who expressed disquiet over the currency crisis. They called on the government to ditch ZiG, which continues to lose ground to all of the major currencies.

The value of ZiG fell by more than 40% to ZWG27.28 yesterday to the US dollar from ZWG13:US$1 in September of this year, demonstrating that currency distortions have continued despite measures put in place by the Government. ZiG is trading between ZWG40 and ZWG50: US$1 on the parallel market.

“…Currency crisis, what crisis? Matshe asked.

He continued: “ZiG is here to stay. Make no mistake about it as it is here to stay.

“Also, what people should know is that ZiG is not Zimbabwe dollar, it is not.We are convinced that the country is not facing a currency crisis.

“The RBZ has allowed greater flexibility on the  interbank market,  that you yourselves, the business executives recommended us to do.When the executives got the greater flexibility on the interbank market, they started saying ZiG is in the graveyard. It’s not. Why do I say so?

“Is it because the currency depreciation from 13.99 per US$1 to ZiG24.39:US$1 in September 2024 ?

This cannot be called a crisis. Even countries like Kenya have currency fluctuations and its depreciation can not be compared to a collapse like a deck of cards but in our situation why do we say so?

“Let’s not fool ourselves and think that way because there is a depreciation. Currency depreciates as fundamentals change. The businesses were  already benchmarking their prices in depreciated alternative exchange rates and that put pressure on inflation. The pressure on the currency brought about by the demand on the United States dollars. ”

It comes at a time the central bank is implementing a raft of measures in an attempt to stabilise the economy.

The deputy governor also asserted that the economic fundamentals were strong and ” the formal sector needs to find flexible   and technology driven ways to deal with these pressures”.

 “ We believe that these measures and a robust forex earnings resulted in a macroeconomic stability that is  envied by some of the countries  in the region. ZiG is gold backed but not gold led. The ZiG stability has seen the increase in local currency usage.

“The depreciation in the exchange rate in September 2024, from where we sit, is transitory and is not driven by money supply.

“The mismatch between forex demand and supply in August to September resulted in the resurgence of parallel market premiums and inflationary pressures,” he said.

Dr Matshe warned CEOs.

“Let’s drive our economy facing forward not backwards. Yesterday is gone and tomorrow is yet to come. Let’s strategies about tomorrow not to focus on what happened yesterday. We learn, we adjust a bit if we continue to look backwards on how we struggled in the past, this time we try to be driven by the market and science.”

Additionally, Dr Matshe  claimed that the RBZ has enough  forex to buy every ZiG in this economy and there is no need for businesses to worry.