Mthuli Ncube Calms Fears Over ZiG Depreciation, Bolsters Confidence in Reserves

Zimbabweans are increasingly concerned about the volatility of the Zimbabwean dollar (ZiG). Yet, Finance Minister Mthuli Ncube remains confident that the country has secured enough reserves to cover any potential shortfall in local currency deposits.

Amid sharp depreciation, the local currency tumbled against the US dollar, prompting retailers to reject the ZiG and prefer the greenback. Ncube’s reassurance, however, offers a calming antidote to the current anxiety surrounding Zimbabwe’s financial future.

Ncube claims that the current exchange rate of US$1: ZWG25 has no cause for alarm. Zimbabwe’s US dollar reserves are believed to match the ZWG10 billion local currency deposits circulating within the banking sector. This balance, according to the minister, should shield the exchange rate from future pressures, as the reserve cover is enough to support all local currency deposits.

While the official exchange rate held at US$1: ZWG13.80, the parallel market saw rates soar to as high as US$1: ZWG30 during a period of financial turbulence in the last few months. The public remains cautious, with the previous surge in exchange rates still fresh in their minds.

Prices of basic commodities skyrocketed in response to these shifts, forcing Zimbabweans to adapt quickly to an economy where the dollar reigns supreme. The government’s measures, though, have brought some stability, preventing further price increases. This change has led some experts to believe that the economy might be stabilizing, but citizens are still wary.

Ncube insists the government’s actions are working. The Reserve Bank of Zimbabwe (RBZ) hiked interest rates, aiming to discourage speculative borrowing for foreign currency. Such speculative activity has been a major contributor to the instability in Zimbabwe’s currency markets. By raising interest rates and tightening the reserve requirements, the government hopes to curb these practices.

Beyond these short-term interventions, the broader question is whether these measures will provide a lasting solution or if Zimbabwe’s economy will remain in a state of cyclical volatility. Some financial experts point to structural issues that must be addressed for sustained stability, including corruption, fiscal discipline, and better governance.

Still, Ncube maintains that the present reserves position, totaling US$425 million, should be enough to quell fears. When calculated against the ZWG10 billion of deposits, this level of reserves seems to offer a sense of balance, at least in the near term.

His assurances come during a time of uncertainty for the average Zimbabwean, where the local currency is seen as increasingly unreliable. For many, it’s not just about reserves or interest rates, but a more profound loss of confidence in the currency itself.

The government’s interventions, although bold, may not be enough to restore this trust quickly. Many Zimbabweans have seen these promises before, only to be met with cycles of hyperinflation, rapid devaluation, and economic turmoil.

What will truly be telling is whether these policies hold up under sustained market pressure, or if another wave of depreciation will catch the government off-guard. While Ncube’s optimism is evident, the on-the-ground reality is a different story for those struggling to keep up with rising prices and a fluctuating exchange rate.

The future of the ZiG depends on whether Zimbabweans believe that their currency will hold value long term. Until then, the greenback remains the currency of choice, offering stability in an otherwise uncertain economy.

The Zim Bulletin