Zimbabwe central bank mulls more measures to protect struggling ZiG currency

By Bloomberg News

HARARE: Zimbabwe’s central bank governor John Mushayavanhu said he will consider using the country’s reserves to protect the bullion-backed currency against severe market disruptions.

Mushayavanhu also pledged to maintain a tight monetary policy stance, characterized by positive interest rates to ensure durable inflation and exchange rate stability.

“The Reserve Bank may consider deploying reserves to stabilize the currency in the event of severe market disruptions that threaten economic stability,” Mushayavanhu wrote in an opinion column published by the state-run Sunday Mail.

“The interventions are also aimed at smoothening transitory foreign currency supply and demand mismatches caused by timing differences in the realization of foreign exchange inflows and outflows,” he added.

The bank may also intervene as part of its broader foreign exchange management strategy to support the desired monetary policy stance or to counteract speculative attacks on the currency, he said.

The depreciation of the ZiG has led to a rally in the Zimbabwe Stock Exchange’s All Share Index, which has now risen 28% since Aug. 28, when the currency started losing value against the dollar.

Mushayavanhu said foreign currency reserves, including gold, are around $375 million, compared with $285 million when the ZiG was announced on April 5.

The ZiG, short for Zimbabwe Gold, traded at 13.56 per dollar when it was first adopted and now sells for 26 on the parallel market and 13.98 officially.

The introduction of the ZiG by the southern African nation is its sixth attempt to have a local stable currency in 15 years.