The government has allocated $575 million to support the structured currency scheduled to be unveiled today as part of its move to ensure the survival of the unit after its predecessors failed to perform the basic functions of money.
The proposed structured currency comes against the backdrop of the sharp decline in the value of the local currency against the United States dollar.
Zimdollar has been promoted as a medium of exchange with eight out of 10 transactions taking place In dollars, according to data from the national statistics agency ZimStat. Unveiling the support yesterday, the government said it had gold worth US$175 million as well as foreign exchange reserves worth US$100 million and US$300 million held by the Reserve Bank of Zimbabwe (RBZ) and the Treasury, respectively.
Federal Reserve Governor John Mushayavanhu said yesterday that he verified the assets held by the central bank, in particular, the cash stock of gold and other reserves held in vaults when he took office.
“When he took office, I showed His Excellency (H.E. Mnangagwa) the gold in the central bank’s vaults and that we have 1.1 tons of gold, which I saw,” he said.
“We also have other precious metals in the vaults, such as diamonds and so on, which, if converted into gold, would be worth about 0.4 tons of gold. This makes the total fraction of our gold in the vaults converted into gold 1.5 tons.
Mushayavanhu said the central bank has a ton of gold held abroad.
“So, in total, when you talk about reserves of gold and other precious metals, you’re talking about 2.5 tons, converted to US dollars, and at today’s price, it would be about US$175 million.
“Furthermore, I have also confirmed the cash balances held by the central bank, which amount to about US$100 million. These are the assets I have held at the central bank,” Mushayavanhu said.
Permanent Secretary for Finance, Economic Development and Investment Promotion George Guvamatanga added that the government has another $300 million saved in various private banks.
He added: “His Excellency also instructed that we cannot have a government without reserves. “So, on top of the instructions that came to the central bank, they also came to the treasury.”
“If I may, Your Excellency, allow me, just today, to mention that the Government of Zimbabwe, not in the Central Bank, but in several private banks, holds reserves amounting to US$300 million.”
This can be easily verified, he said.
Guvamatanga said the reserves were more than enough to support the proposed structured currency.
“There are government reserves and central bank reserves, and if we put that together, we have more than enough capital cover between the Reserve Bank and the government of Zimbabwe,” he said.
“So the total is more than enough for those who ask: Do we have enough reserves?”
The reserves are about four times lower than what the central bank estimates circulating in the informal sector at a time when the government needs billions of dollars in capital expenditures.
President Emmerson Mnangagwa announced the introduction of the new currency during his maiden Cabinet address at State House in February this year.
The structured currency will limit the rapid decline in the value of the zimdollar which has fallen by about 79% year-to-date to 1:ZWL10 US$927.52.
The value of the local currency fell by more than 700% last year to close the period at $1 USD: $6,104.72 ZWL.
Since then, the value of the local currency has depreciated by approximately 142% to US$1: US$26,412.72.
Yesterday, UK-based economist Chinnaimoyo Mutambasiri said the reserves were insufficient, adding that the move came at an inappropriate time.
“The last budget statement was set at US$10 billion and this budget has already reduced social welfare which is now exacerbated by the drought and cholera situation,” she added.
“This latest structured currency stunt will only benefit the political elite as we have observed in recent years. It is an irresponsible and ill-timed strategy.”
Economist and member of the Central Bank’s Monetary Policy Committee, Isara Guananyaya, advised the public to wait for the monetary policy statement to be released today for details on the structured currency rollout.
“Let us not give the wrong impression to the market by irresponsibly commenting on this sensitive issue. Let us give time to announce the monetary policy so that we actually know what structured currency is.”
“I want to advise my colleagues not to comment rashly and misadvise the innocent community so that they take a wrong stance. For now, I will reserve my comment until the monetary policy is announced. We have to be careful because we may put pressure on the market.”
A structured currency is usually a set of guidelines that govern the interchangeability of a currency with other currencies as well as providing a support system to maintain its value.
This will be the fourth time that the government has attempted to introduce stable legal tender in the country after bearer cheques, bond notes and Zimdollars.
Meanwhile, lawmakers this week called on Ncube to explain to Parliament the runaway foreign exchange rate.
The lawmakers made the call during a question and answer session on Wednesday, saying Zimbabweans are suffering because of the accelerating exchange rate.
Proportional representation
Lawmaker Tabeth Murwira said: “People are worried because of the exchange rates that are rising on a daily basis. As I speak now, the exchange rate is 1:45,000. What is the government’s policy on this?
Chikanga lawmaker Lynette Carini-Kore said lawmakers had been waiting for Ncube for a long time, adding that his speech was long awaited.
She said: “Things are not good. The minister must come as soon as possible so that we know what he has under his sleeve.”
In his contribution, Marondera Central Legislator Caston Matoi said the RBI’s forex auction system was not effective.
“We want to know where these rates are coming from because they are not working and have not happened. The minister should be honest and answer questions as they come and not joke around when people are suffering in this country.
Acting head of the government business sector in Parliament, Amon Murwira, said the government was working hard to stabilize the economy.
“Our policy is to see and try by all means that our currency is strong. There are a lot of steps being taken but these steps will be clarified by the Finance Minister in the shortest period of time,” he said.
However, Deputy Speaker of the National Assembly, Tsitsi Gezi, said Ncube would address the assembly soon.
She said: “The Minister of Finance will come with a ministerial statement, so we should leave it at that.” Newsday
