Economists skeptical of ZiG

CLOUDINE MATOLA

Multiple economists  are pessimistic   about the future of the digital dollar  backed by gold , which the central bank  unveiled recently  under the code name ZiG, which stands for  Zimbabwe Gold, for transactional use.

Both private users and businesses can transact with the digital currency. The dollar can be purchased from banks in both local and US dollars, and prices for goods and services will also be expressed in ZiG.

However, a number of economists that spoke with Business Times this week expressed pessimism.

“Will it improve the situation, I’m not sure, unless and until issues of fiscal prudence, monetary prudence and other social reforms that are critical to enhance confidence are addressed,” economist Prosper Chitambara said.

He added: “There is obviously more to do to improve the situation than just coming up with gold backed currency. We need to enhance our fiscal sustainability, monetary sustainability as well as institutional reforms to enhance confidence, and competitiveness of the economy.”

Chitambara added that the ZiG must be liquid and tradeable by the general public in order for it to be widely adopted.

“It’s possible if it’s widely accepted because ultimately the effectiveness of any currency is a function of acceptability by the public and acceptability is an issue of liquidity and tradability,” he said.

Chitambara continued, stating that the public prefers to transact with hard cash because it is more tradable than digital currency in the current economic climate.

“So, I think gold is a good asset to underpin a currency but I’m not sure whether economic agency will prefer transacting with that currency or the United States dollars given the obvious advantages with transacting in United States dollars in terms for example tradability and its highly liquid currency and highly tradable currency so I think that makes it very preferable currency of first choice by economic agency,” he said.

Another economist Vince Musewe said most  people in the informal sector might not use the digital currency for payment since they prefer hard cash.

“The gold backed digital currency is really an attempt to increase alternative transactional assets. I think it is a sophisticated way of building a new confidence in the market place. Whether the majority who operate in the informal sector will utilize it is doubtful. They prefer hard cash,” he said.

Fanwell Mutogo, the CEO of the Bankers Association of Zimbabwe, said  ZW$69.79bn  worth of digital currency has been purchased thus far.

“Cumulatively equivalent to ZW$69.79bn has been purchased,” he said.

Mutogo said there have not been many transactions since some clients are still holding their tokens and waiting to redeem them.

“Clients are holding the tokens and yet to transact. Very few transactions on ZiG have taken place. Some clients indicated they were waiting to redeem instead and not transact,” Mutogo said.

He added that most banks’ systems were yet to be enabled in order for clients to transact.

“There have not been significant transactions yet, but we are expecting improved activity,” he said.