Currency Credibility: Zimbabwe's Challenges with ZiG-Dollar Dynamics
Zimbabwe's gold-backed currency claims stability but struggles with credibility. Despite $701 million in reserves, a parallel market premium raises concerns. Authorities hope the ZiG will gain public trust, yet a 20% divergence persists. Monetary stability is vital, warns the IMF, urging currency measures and debt clearance efforts.
The Reserve Bank of Zimbabwe recently reported having over 100% reserve cover for its gold-backed currency, yet concerns about currency credibility persist. A significant premium in the parallel market reflects ongoing doubts about the ZiG's stability, notwithstanding the central bank's confidence.
Governor John Mushayavanhu emphasized the importance of maintaining monetary stability and a reliable store of value. While the IMF appreciates the ZiG's burgeoning presence, it calls for stricter money-growth limits and external debt clearance to bolster confidence and economic stability.
Investors remain wary due to current economic conditions, with import reserves covering just 0.8 months, significantly below the IMF's recommended three-month level. Zimbabwe's financial aspirations hinge on achieving currency stability, yet past IMF programs' failures suggest a challenging path ahead.
(With inputs from agencies.)
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