Exiled former Minister of Higher Education Science and Technology Jonathan Moyo has lambasted the Zimbabwean monetary authorities over conflicting information with regards to the Zimbabwe Gold (ZiG) currency.

Moyo says statements that the ZiG is backed by gold, yet it has nothing to do with the exchange of is mere propaganda.

Moyo writes:

AUTHORITIES SHOULD BACK UP THE POLICY MANTRA THAT THE ZIG IS BACKED BY GOLD AND PEGGED TO A SPECIFIC EXCHANGE RATE OR DROP IT AS A FALLACY

Who still believes anything that Zimbabwe’s authorities say about the policy mantra that the ZWG is backed by gold and pegged to a specific exchange rate?

The question arises because, nowadays, listening to Zimbabwe’s fiscal and monetary policy mandarins talk about the ZiG and its value is increasingly becoming an excruciating experience, not least because it requires one to become manifestly unreasonable or irrational by willingly but stupidly adopting a veil of ignorance that ignores or nullifies the currency policy template and fundamentals that the Central Bank pledged to the nation and committed to implement unwaveringly and with fidelity when Reserve Bank Governor Dr John Mushayavanhu launched the ZWG as a “structured” national currency in his maiden Monetary Policy Statement (MPS) delivered on 5 April 2024.

In the wake of the massive devaluation of the ZWG on 27 September 2024 — which Dr Mushayavanhu has been at pains to claim was not a devaluation but just “a once-off event” — the authorities have been employing propaganda sophistry to delink the mantra that the ZWG is backed by gold and pegged to a specific exchange rate.

For example, on 3 October 2024, the Herald newspaper reported that the Minister of Finance, Economic Development and Investment Promotion, Professor Mthuli Ncube, said that the mantra that the ZWG is backed by gold does not mean it is linked to a specific exchange rate. Said Professor Ncube:

“…[ZiG] was indeed backed by gold, but the exchange rate was not fixed to gold…There is a difference in fixing an exchange rate and [there is a difference in] backing an exchange rate.”

Notably, Professor Ncube simply asserted that, “There is a difference in fixing an exchange rate and in backing an exchange rate” but he did not say what that difference is.

A week later, on 10 October 2024, Dr Mushayavanhu followed Professor Ncube’s line to delink the mantra that the ZiG is backed by gold and pegged to a specific exchange rate, telling ZBC that:

“…indeed, our currency is backed by gold and other precious metals, and the foreign currency balances that we have with the Federal Reserve (sic.), there is a difference between backing a currency with gold and linking a currency to the prices of gold.”

In claiming that “there is a difference between backing a currency with gold and linking a currency to the prices of gold”, Dr Mushayavanhu was self-evidently parroting the line earlier taken by Professor Ncube; and doing so as a regurgitation, without explaining the claimed conceptual difference.

Now, if having the ZWG backed by gold has nothing to do with its exchange rate, then that means the mantra that the ZWG is backed by gold, and pegged to a specific exchange rate is in fact just propaganda, in which case the public can only wonder what the purpose of the propaganda is.

This begs some simple but important questions arising from the fact that on 5 April 2024, in his maiden Monetary Policy Statement (MPS), Dr Mushayavanhu laid out a very clear currency policy template in which he outlined what it meant to say that the ZiG was a “structured” currency backed by gold in relation to the “exchange rate management system”:

  • Why is it that, since then, Dr Mushayavanhu — and indeed the monetary and fiscal policy authorities in general have been winging it; moving away from that policy template announced in the MPS on 5 April 2024, saying and doing things or making up new things, that have no relationship to that MPS template?

  • What is the propaganda in aid of? Who is fooling who, what for?

  • Given the difference between officialdom and public policy; wherein the former is what officials say or do when they feel like saying or doing it, whereas public policy is a rational, objective and consistent unpacking or analysis of a selected course of action after weighing its pros and cons in pursuit of an explicit objective; is the apparent ‘winging it’ approach an expression of officialdom or an expression of policy?

  • Do the authorities understand that the exercise of officialdom to be ‘authoritative’ — full of sound and fury — is not public policy?

In the circumstances, and on the back of the above questions, it is instructive to recall what Dr Mushayavanhu said in his maiden MPS on 5 April 2024 about the ZiG as a structured currency backed by gold and pegged to a specific exchange rate with particular references to paragraphs 149, 150, 161, 162, 163 and 164 of the 5 April 2024 MPS delivered by Dr Mushayavanhu:

Paragraph 149: “currency pegged to a specific exchange rate”
c) Introduction of New Structured Currency
149. The Reserve Bank is introducing a structured currency which is generally defined as a currency that is pegged to a specific exchange rate or currency basket and backed by a bundle of foreign exchange assets (potentially including gold). This means that a Central Bank can only issue domestic notes and coins when fully backed by a foreign “reserve” currency or foreign exchange assets and that the currency is fully convertible into the reserve currency on demand.

Paragraphs 150, 161 & 162: Currency Backed by Gold
150. The structured currency being introduced is anchored by a composite basket of foreign currency and precious metals (mainly gold) held as reserves for this purpose by the Reserve Bank.
Paragraphs 161 & 162: “ZiG shall at all times be anchored and fully backed by a composite of reserves compromising foreign currency and precious metals (mainly gold)”

(iii) Anchor of the Currency
161. ZiG shall at all times be anchored and fully backed by a composite basket of reserves comprising foreign currency and precious metals (mainly gold), received by the Reserve Bank as part of in-kind royalties and kept in the vaults of the Bank. Foreign currency balances will be accumulated through market purchases from the 25% surrender requirements as well as sale of some precious metals received as royalties.

  1. As of 5 April 2024, the Bank has reserve assets of USD 100 million in cash and 2,522 kgs of gold (US$185 million) to back the entire local currency component of reserve money which currently stands at ZW$2.6 trillion requiring full (100%) cover of gold and cash reserves amounting to US$90 million. The gold and cash reserve holdings currently with the Bank represent more than 3 times cover for the local currency being issued.

Paragraphs 163 & 164:
“The starting exchange rate shall be determined by the prevailing interbank exchange rate as at 5 April and the London PM Fix Price of gold as at 4 April 2024”

(iv) Exchange Rate Management System
163. The starting exchange rate shall be determined by the prevailing closing interbank exchange rate as at 5 April and the London PM Fix price of gold as at 4 April 2024.

  1. The intervening exchange rate shall be determined by the inflation differential between ZiG and USD inflation rates and the movement in the price of the basket of precious minerals held as reserves. The weights will be determined by the composition of reserve assets.

All told, and given what is happening the ZWG, Dr Mushayavanhu and Professor Ncube have an obligation to back the policy mantra in the MPS presented on 5 April 2024 that the ZiG is a “structured” currency backed by gold and that the currency is pegged to a specific exchange rate as outlined specifically under paragraphs 149, 161, 162, 163 and 164.

Policy consistency is everything in public policy.

This means operating within the four corners of the policy template that was laid out on 5 April 2024, and staying the course on the back of that common reference point, without ‘winging it’.

Any policy that does not in the main promote and lead to predictable behaviour, and predictable policy outcomes, is useless; and does not deserve to be called a policy, and should be reviewed or abandoned!