RBZ says gold reserves backing new ZiG currency increasing

By Bloomberg News

HARARE: Zimbabwe’s gold reserves backing its new bullion-linked currency are increasing and the stockpile’s value is also being boosted by the higher price of the precious metal, the central bank said.

The Reserve Bank of Zimbabwe is seeing royalty payments of gold “rising daily,” said Deputy Governor Innocent Matshe.

“As long as we are mining, gold reserves are increasing by the amount that we produce,” he said Wednesday in a telephone interview. “The proceeds from other precious minerals are being used to stockpile gold.”

The central bank will give an update on the gold reserves in stock after the next meeting of the monetary policy committee, scheduled for June 26.

The ZiG, short for Zimbabwe Gold, launched April 5 is backed by 2.5 tons of gold and $100 million in foreign currency reserves held by the central bank. It is the nation’s sixth attempt to have a functioning local currency in 15 years.

The ZiG was trading Wednesday at a nearly one-month high of 13.27 to the dollar, gains which are “long overdue,” according to Matshe. “Precious metals have gained over the past few days,” he said. “We don’t want the currency to be misaligned.”

Miners were urged this week to lift gold output to help boost reserves to back the new currency. The central bank has also vowed to only print ZiG notes than can be backed up by reserves.

The pledge is aimed at avoiding a repeat of past practices when the central bank funded government spending by printing money, which led to the hyper-inflation that doomed Zimbabwe’s previous efforts to establish a stable local currency.