Online Reporter
Debra Matabvu
Chief Reporter
RESERVES supporting the Zimbabwe Gold (ZiG), including foreign currency and gold, have increased to US$533 million since President Mnangagwa gave a directive requiring 50 percent of mineral royalties to be paid in kind.
The reserves, part of which include 2,67 tonnes of gold valued at US$228 million held in Reserve of Zimbabwe (RBZ)’s vaults, represent more than three times the amount of local currency in circulation, a development expected to anchor currency and price stability.
When the ZiG was launched on April 5 last year, the central bank held about 1,5 tonnes of gold.
The total ZiG in circulation currently stands at ZiG183 million, accounting for approximately 5 percent of the reserve money (the total money in circulation, including cash held by the public and reserves held by commercial banks at the central bank).
The increase in reserves has been driven by a significant rise in gold production, which reached a record 36,48 tonnes in 2024, reflecting a 21 percent growth compared to 30,10 tonnes in 2023.
In an interview with The Sunday Mail, RBZ Governor Dr John Mushayavanhu said: “Indeed, the country’s gold production reached a record level of 36,48 tonnes in 2024, reflecting a 21 percent increase from the previous year’s output of 30,10 tonnes. The rise in gold production has been vital for the Reserve Bank to build foreign reserves through royalties and foreign currency earnings from exports, which is critical for backing ZiG. The boost in gold output has led to higher gold holdings needed to support and cover the ZiG. Consequently, as of January 9, 2025, the available foreign reserves (reserve cover) held by the Reserve Bank in the form of gold and foreign currency cash were about US$533 million, representing more than three times the actual reserve money.”
The Reserve Bank’s gold reserve holdings, he said, have steadily increased due to the bank’s reserve accumulation strategy, which has enhanced both foreign currency and gold holdings.
Dr Mushayavanhu said the central bank is also considering introducing higher denomination notes of the ZiG to facilitate easier cash transactions.
However, he emphasised that the volume of new notes set to be drip-fed into the market will be aligned with projected economic activity to maintain stability.
“Plans to introduce higher denominations are underway and the amount to be introduced will be optimal and consistent with the envisaged economic activity,” he said.
“Going forward, the Reserve Bank expects to progressively increase the proportion of cash to total deposits to 5 percent, which is close to countries with similar economic structures in the region.”
Since its introduction in April 2024, the ZiG currency has performed strongly, particularly between April and August 2024, when it brought significant stability to the local economy.
Although the currency faced significant headwinds in September 2024, the RBZ implemented monetary measures that stabilised the exchange rate and narrowed the premium from 130 percent to below 40 percent by December 2024, reinforcing confidence in the local currency.
Presently, the local currency is trading at US$1: ZiG24 on the official market, while the parallel exchange rate stands at US$1: ZiG35-38.
“Given the current money market position, the Reserve Bank is committed to maintaining the value of the ZiG and implementing measures that will preserve its transactional and store-of-value functions and support the de-dollarisation journey,” he added.
“The RBZ will progressively increase the amount of ZiG in circulation to optimal levels, consistent with anticipated broad money growth supportive of economic activity.
“The RBZ will ensure that the increase in local currency is fully covered by foreign reserves (gold, other precious metals and nostro balances), at all times, and in line with the foreign reserves accumulation strategy.”
The central bank, he said, will continue intervening in the market to promote the use of the local currency.
Dr Mushayavanhu said the RBZ has also begun auditing the gold reserves held in the bank’s vaults, with the certificate of audit set to be issued upon completion of the exercise.
In October 2022, President Mnangagwa introduced a policy to have mining companies extracting precious and high-value minerals to cede refined mineral products as part payment of royalties to Government in an initiative introduced to build the country’s reserves.
Monetary authorities say they will continue to progressively build up reserves until they reach the import cover needed to sustainably anchor the local currency.
