Almot Maqolo, Staff Writer 
INDUSTRY leaders are intensifying their push for the establishment of a currency board, as Zimbabwe continues to grapple with exchange rate distortions that are destabilising the economy.
Last Friday, the Reserve Bank of Zimbabwe (RBZ) devalued the recently introduced gold-backed currency by more than 40 percent against the US dollar.
The move came in response to mounting pressure from the parallel market, where rates had surged.
This devaluation has reignited calls for authorities to liberalise the foreign exchange market and strengthen the local currency.
The president of the Confederation of Zimbabwe Industries, Mucha Mkanganwi, highlighted the necessity of commitment and transparency when implementing a currency board.
Addressing a recent manufacturing and retail engagement, Mkanganwi emphasised that a lack of reserves was contributing to the country’s economic problems.
“Most people were expecting a currency board; what we have today is a promise of reserves but no commitment to bring the reserves to support the rate. That is why we have this problem,” he said.
He explained that a currency board would stabilise the exchange rate by locking in reserves and ensuring convertibility between the ZiG and US dollar.
“This allows for swapping at any time, as reserves are always sufficient,” he added.
A currency board is a monetary authority that issues currency backed by foreign exchange reserves, typically in a fixed exchange rate system. Its primary function is to stabilise the economy, control inflation, and restore confidence in the domestic currency.
Buy Zimbabwe general manager, Alois Burutsa, also underscored the need for a well-established currency board.
He stressed that it should be managed by individuals of high integrity and suggested that a presidential economic advisory group, which had been discussed in the past, could support such an initiative.
“We need a proper currency board, which has people of high integrity,” Burutsa stated.
“The problem we are having in this country is the issue of rating.”
He also pointed out the need to channel foreign currency back into the formal market through effective policies.
“Our main problem is that foreign currency is circulating in the informal market. Once it enters this unofficial system, it fails to flow into the formal economy and, consequently, doesn’t reach the banks,” he explained.
Burutsa proposed introducing price flexibility to address the exchange rate challenges, adding, “Let’s agree on this, and then the central bank can manage accordingly. There are various instruments available for them to address these issues.”
Crystal Candy managing director, Jimmy Psillos, highlighted the limitations of the current quasi-currency board system and called for full convertibility as the next step.
“The currency board takes it one step further, whereby you also have complete convertibility. So, in other words, you have the right to take the local currency to the currency board and get the underlying asset for yourself,” Psillos said.
He emphasised that this guarantee of convertibility would restore confidence in the local currency.
“The key thing is instant confidence. Once people know that the backing is there, it won’t take them very long before they don’t need to trade in US dollars because the backing is there,” he added.
Psillos argued that the current system was unsustainable in the medium term, and called for a halt to money printing to avoid exacerbating inflationary pressures.
The push for a currency board is part of broader calls from industry leaders to end the practice of printing money, which many believe is undermining the value of the local currency and contributing to inflation.
Mkanganwi and other business leaders have warned that the increased use of the US dollar could jeopardize the future of the domestic currency. They argue that restoring value and confidence in the ZiG is essential for long-term economic stability.
“We need policies that restore value and confidence in the local currency, or we risk losing it altogether,” Mkanganwi said, underscoring the need for swift and decisive action from the government. newsdesk@fingaz.co.zw
