The new Zimbabwe Gold (ZiG) currency is backed by gold and was presented by John Mushayavanhu, the incoming governor of the Reserve Bank of Zimbabwe (RBZ).
The ZiG is available in denominations of 1, 2, 5, 10, 20, 100, 200, and a ZiG half and a quarter. Next Monday, the ZiG currency will be gazetted with a starting exchange rate of US$1: 13.56.
Zimbabweans have 21 days to change the ZWL notes to ZiG, according to Mushayavanhu, who presented the Monetary Policy Statement today, Friday.
The conversion of all banks’ systems to the ZiG money has been mandated.
He stated that the multi-currency system would remain and that price changes would be determined by fluctuations in the price of gold.
In order to promote simplicity, consistency, and predictability in monetary and financial affairs, banks will convert current Zimbabwe dollar balances into Zimbabwe Gold (ZiG) with effect from April 5, 2024. In the economy, the new currency would coexist with other foreign currencies, he said.
The governor, who was sworn in recently, declared that the swap rate would be used to lawfully convert all ZW$ deposits held by banks, all ZW$ loans and advances given by the industry, ZW$ treasury bills, all outstanding auction allotments, all export surrender obligations, all ZW$ prices for goods and services, and any other obligations denominated in ZW$.
According to Mushayavanhu, “the beginning exchange rate of the ZiG currency will be gazetted at a rate of US$1:13,56 and price shifts will be determined by the movements in gold prices.”
The relevant conversion factor will be applied to credit all ZW$ notes and coins that account holders possess into their ZiG accounts.
After April 5, 2024, the banks will still take these deposits for a further 21 days.
For people without bank accounts, the Reserve Bank has devised special procedures that allow them to exchange their ZW$ notes and coins at POSB and AFC Commercial Bank within 21 days of April 5, 2024.
As a result, 1ZiG, 2ZiG, 5ZiG, 10ZiG, 20ZiG, 50ZiG, 100ZiG, and 200ZiG coins and notes will be issued. These will be distributed through standard banking channels and will be entirely covered by the amount and value of gold and foreign currency held as reserves.
According to him, “the intervening exchange rate of the ZiG to the US$ also informs the currency denominations.”
According to Mushayavanhu, ZiG must always be fully supported and anchored by a composite basket of reserves made up of foreign cash and precious metals, mostly gold, that are held in the Reserve Bank’s vaults and received as part of in-kind royalty by the Bank.
The market purchases made from the 25% surrender criteria and the sale of certain precious metals obtained as royalties will result in the accumulation of foreign currency balances.
As he introduced the Zimbabwe dollar, Mushayavanhu acknowledged that money printing had destroyed the five-year-old Zimbabwe currency.
He said, commenting on the lengthy history of Zimbabwe’s ruling Zanu-PF employing inflationary finance to pay for spending and reward allies: “We want a solid and stable national currency…it does not help to print money.”
A decision published by Mnangagwa’s government on Friday to impose the new money states that it “shall be anchored in and backed or covered by a composite basket of foreign currency reserves and precious metals received [mainly gold] and valuable minerals.”
Along with a few other foreign currency reserves, the Reserve Bank of Zimbabwe has somewhat more than one tonne of gold stored in its own vaults and another 1.5 tonne kept abroad.
Economists are skeptical that these assets will be sufficient to sustain a new currency, particularly in light of the general mistrust among ordinary Zimbabweans who have seen their savings and purchasing power destroyed by years of unrest.
The practice of keeping money at home has become so common among Zimbabweans that it has been endearingly dubbed “mattress banking.”
Over the last ten years, there have been five different currencies, according to Masimba Manyanya, a former head economist at the finance ministry. “It illustrates the disarray within the government.”
Grocery store owner Benson Gandiwa in Harare, the capital, said he hasn’t used local money in years and doesn’t have any plans to start. He claimed, “I stick to the US dollar, which is why my business is alive.”
Zimbabwe’s foreign exchange reserves, which barely cover one month’s worth of imports, are still much below those of many African economies. The central bank of Kenya, which just avoided an impending currency crisis, has restored its reserves to over $7 billion, or 3.7 months’ worth of import cover.
Economist Tinashe Murapata stated, “Zimbabwe has less than a month of reserves, not enough to defend the structured currency.” “It appears that a new currency is issued every five years now.”
The weakest ties in the world economy are starting to heal.
Due to decades of arrears to official lenders on a large portion of its foreign debt, Zimbabwe has been blocked off from international markets and multilateral support, making it impossible for it to restore reserves.
After overthrowing Robert Mugabe in a coup in 2017, Mnangagwa made fresh attempts to end the financial isolation and pay off the debt.
