Zimbabwe Finance Minister Mthuli Ncube on Monday said the country is implementing innovative strategies that would stop the volatility of its currency, with backing the currency with one of its hard assets like gold as the top strategy.
The increment in salaries demand by the civil service and the reduction of exchange due to low and bad commodities are one of the major reasons behind the low currency. The Zimbabwean dollar has falling by 40% since the year began because of those two.
A week ago, President Emmerson said his government would implement “a structured currency”. However, he didn’t give details on how that would work.
In addition, the Finance Minister had said they were already putting in the works. He said the only viable way was to link the exchange rate to some hard assets such as gold as that would manage the growth of liquidity. He said for that to happen, there had to be a currency board that would constrain the value of the asset that backs the currency
The idea going forward is to make sure that we manage the growth of liquidity which has a high correlation to money supply growth and inflation. The way to do that is to link the exchange rate to some hard asset such as gold
To do that you have to have some sort of currency board type system in place where the growth of the domestic liquidity is constrained by the value of the asset that is backing the currency,
Ncube said in a press briefing
He said the new strategy is the final solution to the currency volatility and he would give updates on the strategy over time.
The affliction of the hyperinflation caused under Mugabe is still fighting the South African country.
Upon the relaunched of the local currency for local transactions in 2019, the authorities still went with the use of foreign currency for local transactions shortly after the failure of the local currency.
