TAKUDZWA HILLARY CHIWANZA
HARARE – The Reserve Bank of Zimbabwe (RBZ) introduced a new gold-backed currency, the Zimbabwe Gold (ZiG), on Friday, replacing the beleaguered Zimbabwe dollar in a bid to curb rampant inflation and stabilize prices.
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| RBZ Governor John Mushayavanhu presenting the new ZiG currency when he delivered his Monetary Police Statement today. |
The new currency, announced by the new RBZ Governor John Mushayavanhu in his monetary policy statement, is set to be "fully anchored and fully backed" by a basket of reserves, primarily gold.
The move aims to foster "simplicity, certainty, and predictability" in Zimbabwe's financial affairs, according to the new governor.
The Zimbabwe dollar, which had lost three-quarters of its value this year due to continuous depreciation, will be converted into the new ZiG.
"With effect from today… banks shall convert the current Zimbabwe dollar balances into the new currency," Mushayavanhu stated.
ZiG notes and coins will be issued in denominations of 1, 2, 5, 10, 20, 50, 100, and 200, and will be distributed through regular banking channels.
Quarter and half coins will be issued in due course to address the shortage of US coins.
The new currency will start operating on April 8, with mobile operators and money transfer services given until Monday to transition their platforms to the new ZiG.
The exchange rate of the ZiG has been determined by dividing the official rate by today's gold price, making 1 ZiG equal to approximately US$0.06, or 13.6 to the USD.
Mushayavanhu reassured that the new currency will co-circulate with other foreign currencies in the economy, with the multi-currency system set to remain in place until 2030 as per the law.
The central bank, which currently holds reserve assets of US$100 million in cash and 2,522 kgs of gold (US$185 million), plans to introduce a market-determined exchange rate.
Mushayavanhu expressed optimism that these measures, if correctly implemented, could help curb inflation in the country.
Loss in value
However, the introduction of the new ZiG currency translates into a reduction in value for those with the Zimbabwean dollar balances.
Before the introduction of ZiG, someone holding Z$1 million would have received US$29 at the official exchange rate of Z$33,903 per USD.
However, after the introduction of ZiG, on the same day, that same amount would only be worth US$24, according to the central bank's conversion formula. This formula involves dividing the interbank forex rate into ZWL by the foreign currency exchange rate into ZiG.
To address the issue of inflation, the central bank made a sudden adjustment to the official exchange rate.
On Friday, they set the foreign exchange rate at US$1 to ZWL33,903 and US$1 to ZiG13.5616.
This was a significant change from the previous rate of US$1 to Z$22,050, which had been in effect just two days earlier.
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