Business Reporter
TOP economist, Prof Gift Mugano says the ZWG exchange rate is likely to remain stable beyond 2026, supported by tight liquidity conditions.
Speaking at a dialogue on geopolitical risks posed by the US-Israeli war against Iran, Professor Gift Mugano said tight ZiG liquidity has curtailed speculative pressures on the exchange rate, even during periods of global volatility.
Money supply under the central bank’s hawkish monetary policy framework, is characterised by aggressive liquidity management and high interest rates aimed at stabilising the gold-backed ZiG currency.
The Reserve Bank’s benchmark Bank Policy Rate has been maintained at a restrictive 35 percent for a long period now to discourage speculative borrowing and keep “hot money” out of the market.
Money supply is strictly anchored by a composite basket of foreign currency and precious metals (mainly gold) forex reserves.
Prof Mugano said current reserve money stands at approximately ZiG5 billion, a level he described as “insufficient” to trigger sustained volatility in the foreign exchange market.
He attributed the prevailing stability and positive outlook largely to the central bank’s disciplined monetary management, particularly the containment of money supply growth.
“If you look at the numbers, the money available for transactions in the market is around ZiG5 billion. That is a small component relative to overall demand
“This new currency is likely to endure because the tap on money supply has effectively been closed,” said Prof Mugano.
According to Prof Mugano, even where business operators attempt to stretch the exchange rates through arbitrage, such movements are short-lived due to lack of liquidity support.
He cited recent market behaviour during geopolitical tensions, where some retailers initially rejected local currency and quoted exchange rates as high as ZiG45 to the US dollar.
