An Independent analysis by: Hon Tanatsiwa Mukomberi (MP for Masvingo South) 

*Structured Currency*

- It is a currency, notes or coins, backed by another asset for example gold or forex. Zig as a structured currency is backed by gold reserves. 

*Stability of exchange rate*

- given that Zig is a structured currency deriving its value from gold(a valuable asset), it is likely to maintain a stable value, ceteris paribus. 

- the value of zig against USD therefore appreciates or depreciates as gold price increases or decreases at the international market. Given the stability of gold price, the zig is more likely going to be a stable in value currency. 

*Impact on the business Environment*

- As the government has given a position to increase the percentage of tax payable in local currency (zig) to 50 %, this is a good buy-in of the zig by the government that boosts confidence in traders to accept zig as *good money* in playing it's function as a medium of exchange. 

- the volume of transactions in zig is more likely going to increase, ceteris paribus, as zig prices are competitive in the commodity market. For example, new prices of data by econet wireless are cheaper in zig than in USD, in real terms. 

- if this is sustained overtime, zig will boost the velocity of circulation of money and the acceptibility of domestic currency in the commodity market. 

*Impact on savings*

- As Zig is likely to maintain stable value in tandem with the value of gold backing it, the appetite to save(Marginal propensity to save) money even in local currency is more likely going to increase. Businesses can store value in the form of a stable local currency than before when the local currency was subject to endless value erosion due to exchange rate volatility. 

- the increase in savings at commercial banks by both individuals and corporates results in availability of money for lending(credit creation through credit multiplier, subject to the gazzeted required reserve ratio). 

- though it increases money supply disproportionately, credit creation supports investment through availability of capital. The increase in investment resultantly lead to economic growth through investment multiplier effect on national income. 

*Gresharm's law Effect under multi-currency regime*

- the Gresharm's law stipulates that, if two currencies of different intrinsic values are allowed to co-circulate with a forced extrinsic value parity, bad money will chase away good money; resulting in bad money further losing value. 

- this was the scenario of bond note and USD. 

- however, zig is free from the Gresharm's effect against USD in the sense that, zig derives it's value from gold which backs it to maintain its value and remain as good a currency as the USD, both in the commodity market and the money market. 

*Money supply growth through overprinting*

- it being a structured currency backed by a specified quantum of gold reserves from which it derives value, printing of notes will be restricted to the value of gold reserves backing the printed currency. This systematically curbs excessive printing of money. Thus, the currency maintains value through its scarcity as a fundamental feature of good money. 

*Speculation and arbitration in parallel market operations*

- as the zig derives its value from the market value of gold, chances of arbitration are likely to limited, hence killing the forex black market. 

*Convertibility advantage of zig*

- the convertibility of Zig to other currencies works as confidence builder to the holders (individuals and corporates). 

- confidence in it's convertibility maintains its demand and hence value is sustained, ceteris paribus. 

*Recommendations*

 The following are key fundamentals that need intervention by the government: 

- There is need for strong grassroot awareness campaigns informative to the public on the currency reform with special attention on, (A) the conversion of zwl balances to zig, (B) the features of the currency including the fact that it is backed by gold. 

- The creation of a clear financial inclusion road map by the Central bank in congniscence of the marginalised's improved access to financial services and new currency literacy. 

- boosting zig convertibility confidence by making available foreign currency on demand so that zig will preserve its value through public trust of the currency. 

*Conclusion* 

- in a nutshell, the zig introduction is a key to unlock economic growth fortunes through macroeconomic stability given the foregone. It only calls for public confidence and support of this noble macroeconomic initiative to achieve the intended results and final realisation of *Vision 2030*-towards an upper middle income economy.