RBZ introduces new ZiG term deposit bills

Published: 12 hours ago

The Reserve Bank of Zimbabwe (RBZ) has introduced a new round of Zimbabwe Gold (ZiG)-denominated Term Deposit Facility Bills, offering investors an opportunity to earn interest while supporting efforts to stabilise the local currency and manage liquidity in the economy.

The new instruments are available in 30-day, 60-day and 90-day tenures, carrying annual interest rates of 8%, 9% and 11% respectively. The facility is open to banks, corporates and individual investors.

According to the central bank, the initiative forms part of broader monetary policy measures aimed at strengthening confidence in the ZiG currency, maintaining exchange rate stability and reducing excess liquidity in the financial system.

The move comes at a time when concerns have been raised about growing liquidity levels and sustained pressure on foreign currency demand. Zimbabwe has recorded several months of negative trade balances, meaning imports have exceeded exports, increasing the need for foreign exchange to settle external obligations.

By encouraging market participants to invest surplus ZiG balances in short-term deposit instruments, the RBZ hopes to reduce the amount of money circulating in the economy, thereby easing pressure on the exchange rate and helping contain inflationary risks.

The latest facility follows a series of interventions introduced by the central bank in recent years to absorb excess liquidity and support monetary stability. These include the introduction of the Mosi-oa-Tunya Gold Coin in 2022, Gold-Backed Digital Tokens in 2023 and various deposit facilities designed to preserve value and strengthen confidence in the local currency.

Economists generally view liquidity management as a key tool in maintaining currency stability, particularly in economies where exchange rate movements are heavily influenced by money supply growth.

For ordinary Zimbabweans, the effectiveness of the new term deposit bills could translate into a more stable exchange rate, lower inflationary pressures and increased confidence in the ZiG currency. Greater stability could also help businesses plan more effectively and reduce the uncertainty associated with price fluctuations.

However, tighter liquidity conditions may have trade-offs. By locking away funds that would otherwise circulate in the economy, the measures could reduce the availability of credit and slow borrowing by businesses and consumers, potentially dampening economic activity in the short term.

The success of the programme will largely depend on investor uptake and the RBZ's ability to maintain broader monetary discipline while balancing the need for economic growth with the objective of preserving currency stability.
- BusinessDaily

Tags: RBZ,