Zimbabwe’s Central Bank Governor Considers Using Reserves to Stabilize Currency Amid Market Turbulence

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HARARE – Zimbabwe’s central bank governor, John Mushayavanhu, announced that the country may tap into its reserves to stabilize its gold-backed currency, the Zimbabwe Gold (ZiG), in response to potential severe market disruptions.

In an opinion column published by the state-run Sunday Mail, Mushayavanhu emphasized the importance of maintaining economic stability through strategic interventions. “The Reserve Bank may consider deploying reserves to stabilize the currency in the event of severe market disruptions that threaten economic stability,” he wrote.

Mushayavanhu also reaffirmed the central bank’s commitment to a tight monetary policy with positive interest rates, aimed at ensuring long-term inflation control and exchange rate stability. The bank may intervene to smooth out temporary mismatches between foreign currency supply and demand, particularly when inflows and outflows don’t align, he added.

These measures, he explained, are part of a broader strategy to manage foreign exchange reserves, support the central bank’s monetary policy stance, and fend off speculative attacks on the currency.

The ZiG has seen depreciation since its introduction in April 2023, which has sparked a rally on the Zimbabwe Stock Exchange’s All Share Index, up 28% since August 28. The currency, which initially traded at 13.56 per US dollar, now trades at 26 on the parallel market and 13.98 on the official market.

Mushayavanhu revealed that Zimbabwe’s foreign currency reserves, including gold, stand at $375 million, up from $285 million when the ZiG was first launched. This marks the country’s sixth attempt in 15 years to establish a stable local currency.

The ZiG’s performance continues to be closely monitored as the Reserve Bank navigates a challenging economic landscape.

Source: Bloomberg