The plan to introduce a new currency backed by gold tokens to stabilise the Zimbabwe dollar has been described as “noble” by economic analysts, but they called on the Reserve Bank of Zimbabwe (RBZ) to link the digital gold currency to equipment and service providers as a modern way of paying farmers.
RBZ Governor Dr John Mangudya was quoted by our sister paper, The Sunday Mail this week saying there were plans to continue stabilising the local currency through various ways including the introduction of a new currency backed by gold tokens and releasing more Mosi oa Tunya gold coins.
His remarks followed a jump in the exchange rate to US$1: $1 600 on the parallel market.
On the interbank, the rate is US$1: $1100.
The jump in the exchange rate on the parallel market has seen shops adjusting prices, with beef the most significant riser to about $17 000 per kilogramme depending on the quality despite the same kilogramme selling at about US$5, depending on the place.
Some shops have since pegged all their prices in forex, if one wishes to pay in local currency, they convert at the black market rate.
But when paying in foreign currency, they convert at the interbank rate.
Dr Mangudya said: “The movements in the parallel market rate are mainly because of the expectations of increased foreign currency supply in the market when the tobacco marketing season opened. However, the supply of foreign currency over the past three weeks has been lower than expected.
“That expectation raised the rates because people thought there will be more money in the market. It means anyone with local currency would want to convert it to foreign currency. We are addressing this demand for store of value by increasing the number of gold coins in the market so that we manage that demand.
“We shall also soon be introducing digital gold tokens to ensure that those with low amounts of local currency are able to purchase the gold units so that we leave no one and no place behind.”
Dr Mangudya said the value of the gold-backed currency would be based on the obtaining market price of gold and could be used for transactions just like any other type of currency.
Tobacco farmers have convinced monetary authorities to raise their forex portion to 80 percent, with the remainder in local currency.
But given delays in the release of payments by some tobacco buying companies, there is a suggestion to link the gold-backed currency with payment of farmers so they get equipment from part of their money.
Pan-African Chamber of Commerce board member Dr Langton Mabhanga yesterday said he welcomes the gold-backed currency.
“We welcome the initiative by the monetary authority,” he said.
“We urge farmers to take advantage of the new system and technology that will help skirt vultures who in turn cause inflation.
“Using (the digital) currency to pay farmers is one way, but linking the very digital gold currency to equipment and technologies or services, is a modern way of paying farmers.
“The Indian model of providing investment payment methods provides long-term benefits to the farmer, beyond the time value of money, including exponential growth in productivity.”
Dr Mabhanga said equipment and technologies include tobacco curing techniques that are protective of the ozone layer, thus “modernisation and productivity enhancement become some of the rewards”.
“Offering rebate discounted and soft pricing models will be embraced by farmers for their long-term growth and profitability,” he said.
Economist Mr Eddie Cross said when he heard of the plan, he initially “thought it was a joke”.
“But then I thought that people use paper currency which is printed digitally.
“It will only work if the bank (RBZ) guarantees that buyers can be sure that the real thing is available on demand . . .”
The Ministry of Finance and Economic Development and the RBZ have implemented various ways to stabilise the Zimbabwe dollar, including blacklisting contractors that channelled some of their earnings to buying US dollars on the illegal black market.
Over 30 contractors have now been blacklisted since last year.
Further, the Ministry of Finance has stopped paying inflated invoices for work done or services provided, as part of measures to stabilise the local currency.
On Monday, Ministry of Finance Permanent Secretary Mr George Guvamatanga said some payments have been made for work that was never done or service offered and efforts are now underway to force the companies to do the work they were contracted for. – The Herald
