Zimbabwe will require up to US$6 billion in reserves to successfully transition to a mono-currency system by 2030.
This was said by Persistence Gwanyanya, a member of the Central Bank’s Monetary Policy Committee (MPC), during an interview with Channel Africa on Tuesday.
Gwanyanya said that while current reserves stand at US$980 million, this remains well below the level needed for the Zimbabwe Gold (ZiG) to function as the country’s sole currency.
He explained that the existing reserves provide more than four times cover for reserve money, well above the minimum one-to-one backing requirement, but still insufficient for a fully mono-currency environment.
Gwanyanya stressed that Zimbabwe’s domestic currency must be fully backed by foreign currency reserves and precious minerals to ensure stability and convertibility. He said:
“We need reserves that provide between three and six months of import cover for a mono-currency regime.
“To achieve that, Zimbabwe would require between 5 and 6 billion dollars.
“At the pace we are accumulating reserves, we are confident we can reach those levels.”
Gwanyana stressed that although building adequate reserves is crucial for a successful transition to a mono-currency system, the overarching determinant of success is macroeconomic stability. He said:
“We need durable stability, price stability, and exchange-rate stability to restore trust in the currency.
“Stability for beyond one year is crucial for the market to accept a mono-currency arrangement.”
The Reserve Bank attributes the increase in reserves to several factors, including a deliberate government strategy to build reserves, growth in foreign currency income, stronger holdings of gold and other precious minerals, higher global gold prices, and rising export earnings.
Gold reserves currently stand at approximately 3.5 tonnes, with authorities saying that the country has benefited from the recent global gold price rally.
Pindula WhatsApp Channel
Facebook Page
Leave a Reply