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Tuesday, May 21, 2024

Zimbabwe Gold (ZiG) unveiled this Friday

Zimbabwe Gold (ZiG) unveiled this Friday

Story by Stanley James, Business Editor

THE Reserve Bank of Zimbabwe has introduced a new structured currency, known as the Zimbabwe Gold (ZiG) in a move expected to solve exchange rate volatility and promote the use of local currency.

The legal tender was unveiled during the presentation of the Monetary Policy Statement by Reserve Bank of Zimbabwe Governor, Dr John Mushayavanhu in Harare this Friday.

Presenting the 2024 Monetary Policy Statement in Harare this Friday, RBZ Governor, Dr John Mushayavanhu said the structured currency will be pegged to a specific exchange rate.

The apex bank’s new chief revealed that the new system means that the bank can only issue domestic notes and coins that are fully backed by foreign currency reserves, gold and other precious metals.

Government has also issued a Statutory Instrument, legalising the uses of ZiG with Dr Mushayavanhu revealing that prices of goods and services will be converted to the new currency with immediate effect.

“With effect from 5 April, banks shall convert the current Zimbabwe Dollar balances into the new currency which shall be called Zimbabwe Gold ( ZiG) to foster simplicity, certainty and predictability in monetary and financial affairs, the new currency will circulate with other foreign currencies in the economy, the swap rate will be guided by closing interbank exchange rates and the price of gold as at 5 April 2024.

“The swap rate shall be used to make legitimate conversion of all the Zimbabwe Dollar deposits in the banking sector, all Zimbabwe Dollar loans made by the sector, Zimbabwe Treasury Bills, all outstanding auction allotments, all export surrender obligations, all prices of goods and services in Zimbabwe Dollars and any other Zimbabwe Dollar denominated obligations, on conversion of all the current Zimbabwe Dollar balances banks are directed to rename all the current Zimbabwe Dollar accounts as ZIG accounts, Gold Backed Digital Tokens ( GBDT) accounts will no longer be called ZiG accounts,” he said.

Dr Mushayavanhu added that the introduction of the new currency will require the issuance of new banknotes to facilitate transactions in the economy.

He added, “These notes shall be gradually issued in the market to cater for small transactions and to ensure the availability of change, thus mitigating the issue of retail vouchers in the local economy as such the proposed denominations will bring convenience to the transacting public. Accordingly, ZiG notes and coins shall be issued in denominations made up of 1 ZiG, 2 ZiG, 5 ZiG, 10 Zig, 20 Zig, 50 ZiG , 100 ZiG and 200 ZiG which will be distributed through the usual normal banking channels and will be fully covered by the quantity and value of gold and foreign currency held as reserves.

“The currency denominations are also informed by the intervening exchange rate of the ZiG to the US Dollar, ZiG shall at times be anchored by a composite basket of reserves comprising foreign currency and precious metals mainly gold received by the RBZ as part of in-kind royalties kept in the vaults of the bank, Foreign currency balances will be accumulated through market purchases from the 25 percent surrender requirement as well as sale of some precious metals received as royalties.”

Other key highlights of the 2024 Monetary Policy Statement include the removal of the foreign exchange auction system.

Foreign currency retention thresholds have been maintained at 75 percent across all sectors while banks were directed not to charge individual bank accounts with a daily balance of 100 United States Dollars or ZiG equivalent for a period of 30 days.

Companies have also been mandated to settle fifty percent of their tax payments in ZiG, among other expectations.

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