RBZ Auction allots US$19 million amid calls for lasting solution to ZWL instability – NewZimbabwe.com

By Alois Vinga

THE Reserve Bank of Zimbabwe (RBZ) Auction this week allotted US$19 million to support productive needs on the back of ZWL depreciation amid calls for a lasting solution on volatilities bedevilling the local currency.

A trading update released at the close of business shows that on the Main Auction, a total US$16,7 million was allotted on the Main Auction platform.

On the SME Auction platform, US$2,2 million was allotted  with a huge chunk on the two platforms going towards supporting raw material and machinery  needs.

The official exchange rate at US$1: ZWL 1 020 trailed behind the parallel market rate which is now hovering between US$1: ZWL 1 700 to a high of US1: ZWL2 000.

The developments have prompted members of the public to demand for a once and for all solution to the exchange rate challenges which have triggered hardships as prices continue to soar.

But speaking on the obtaining challenges, economist Persistence Gwanyanya said the problems bedevilling the Zim dollar have a long history dating back 14 November 1997 to hyperinflation of 2008 to dollarisation (2009-2013) and currency reforms.

He admitted that there is a strong link between money and confidence – an attribute which continues to dog the local currency.

“As such, in the current circumstances, there is a need for more effective measures to restore confidence in the ZW$, boost its demand and counter the dominance of the US$ to avoid costly re-dollarisation.

“l can’t think of any product other than gold that can compete with the US$ especially as a store of value. This could be the reason why RBZ’s Monetary Policy Committee has opted for gold instruments starting with physical gold coins and then the digital backed tokens to stabilize the ZW$,” he said.

He said the fact that out of the 31,866 gold coins sold as at 10 March 2023 out of which a negligible amount was redeemed on vesting on the back of demand for the product attests to the potential which bullion has in stabilising the local currency.

The expert said such thinking motivated the digital gold coins, which are highly divisible to cater for the different needs of the market, underscoring that their  divisibility attribute gives digital gold tokens a competitive edge over cash US$ and make them more accessible to the market.

“Clearly, given the low confidence levels in the economy RBZ is expected to put in place adequate measures to assure the market about the adequacy of the gold to back the digital tokens all the time.

“Because both gold coins and gold backed tokens are going to be limited to the gold reserves, we have seen the products as restraining ZW$ supply, which supports the current tight monetary policy stance,” said Gwanyanya.