“ZiG Only By 2030?”: Mthuli Ncube Reveals Conditions for Phasing Out US Dollar in Zimbabwe)
“ZiG Only By 2030?”: Mthuli Ncube Reveals Conditions for Phasing Out US Dollar in Zimbabwe
Finance Minister Mthuli Ncube has outlined the conditions Zimbabwe has to meet to successfully phase out the US dollar and use the local currency only.
He said Zimbabwe needs to reduce its debt and build its foreign currency reserves before it can resort to a monocurrency. Currently, the country is using a multi-currency system, which includes the local Zimbabwe Gold (ZiG).
Mthuli said Zimbabwe needs to ensure it has enough foreign currency reserves to be able to cover six months of imports. He said this is to ensure that the ZiG doesn’t lose value.
“First of all, we’ll need to be sure that we have adequate foreign reserves to be able to defend the domestic currency, the ZiG, whenever it comes under any speculative attack. There’s certain rules and benchmarks around the world such as six months import cover, for example, so we’re then able to cover six months of imports without further inflows. Really it’s about being able to defend the currency when it’s under speculative attack,” Mthuli explained.
He explained that Zimbabwe needs to clear its US$21 billion external debt so that the country can access a balance of support
“We need to make progress on the extent of our external arrears which obviously also pose risk to the value of any currency. If you’ve got debt arrearrs or high indebtedness externally that can that pose risk to your currency, risk to your preserved position. So again we want to make sure that our arrears clearance programme gains traction we made progress towards clearing those arrears because what that will do it will then allow us to access what we call balance of payments support,” Mthuli explained.
His response comes after the RBZ reaffirmed its commitment to phase out the US dollar and make Zimbabwe Gold (ZiG) the only currency by 2030.
