Zimbabwe: Central Bank Says ZWG Backing Gold Reserves Up U.S.$450 Million

THE Reserve Bank of Zimbabwe (RBZ) says the quantum of gold backing up the ZWG has increased to US$450 million on the back of calls for citizens to be calm ahead of strengthening stability in the coming months.

This come shortly after the local unit experienced the toughest hurdle, losing 43% of its value following the central bank's decision to devalue the ZWG in a bid to close the gap opened up by the parallel market rate last month.

Zimbabwe has faced several challenges in stabilizing the local currency with authorities blaming the 2008 hyperinflationary era for prompting speculative tendencies leading to the spiralling exchange rates.

But speaking to the media on the sidelines of the International Monetary Fund (IMF) and World Bank annual meetings currently underway in the US, RBZ governor, Dr John Mushayavanhu said resources backing up the ZWG have soared, leaving very little chances for any exchange rate depreciation.

"Certainly ZWG is backed by gold. As the central bank we are accumulating gold that we are collecting from royalties. Those reserves have been accumulating over the past years. At the time we launched the ZWG, we had US$285 million worth of reserves. Now those reserves have since grown to US$450 million but deposits have not significantly increased.

"What that means is that we have more gold backing the currency in circulation so any exchange rate depreciation that may have occurred is temporary because what we see is a situation where if we as a central bank wanted to buy all the ZWG in circulation we could do that without the exchange rate having to move," he said.

He said the exchange rate would have strengthened if the central bank had decided to buy back all the deposits that are in the market using the available reserves.

Added Mushayavanhu, "As the central bank we will continue to walk the talk. We made our promises and I can assure you that as people get more and more used to ZWG the exchange rate will strengthen and the currency will be more acceptable".

He added the RBZ will continue to accumulate the ZWG backing reserves and expressed optimism the new unit will eventually stabilize.

This article was originally published on New Zimbabwe.