THE introduction of the Zimbabwe Gold (ZiG) currency has triggered panic on the market as some informal retailers immediately began rejecting bond notes or opted to inflate prices following the announcement.
BERNARD MPOFU
Zimbabwe’s central bank has outlined how it plans to roll out the new structured currency as the economically-troubled nation, which gained global notoriety in 2008 for printing one-hundred-trillion-dollar notes, attempts to restore the value of the domestic currency but the news has stoked inflation overnight.
With over 80% of total transaction being carried out in hard currencies, most retailers and service providers were now shunning the Zimbabwe dollar for a more stable United States dollar or South African rand as a medium of exchange.
While the Reserve Bank of Zimbabwe is yet to conduct public awareness campaigns for the new currency, market confidence in the new monetary unit appears to be low.
New central bank governor John Mushayavanhu said the currency, which on Friday traded at US$1:ZiG 13.5616, will replace bond notes which had been in the system since 2016.
Before Mushayavanhu’s presentation of the much-anticipated Monetary Policy Statement, retailers in both the formal sector were asking for ZW$3 500 as an equivalent of US$0.50.
But after the news of a new currency filtered through, US50 cents is now worth ZW$5 000 bond notes as arbitrage seekers cash in before the phasing out of the old currency later this month. By Monday afternoon, some retailers were now demanding up to ZW$12 000 for goods worth US$1.
Mushayavanhu said banks would query depositors depositing ZW$100 000 or more in bond notes on why they kept this money. The money is less than US$5 on the parallel market.
As the launch day progressed, mobile phone subscribers were inundated with messages informing them of service disruptions later that day for the currency changeover. As of Monday, mobile network operators like EcoCash had fully completed reconfiguring their systems.
Bankers’ Association of Zimbabwe chief executive Fanwell Mutogo told The NewsHawks that the configuration of banking systems is expected to be completed by Tuesday.
“All banks are diligently working on the conversion from ZWL to ZiG, and we are hoping most banks will be back online on the ZiG platform by the end of the day tomorrow (Tuesday),” he said.
“Members of the public who do not have bank accounts were given the window to deposit the old bank notes with POSB and AFC within 21 says, and yes, we believe those holding on to the old notes will certainly deposit within the stipulated time frame.”
Here is how the apex bank will roll out the new notes:
- With effect from 5 April 2024, banks shall convert the current Zimbabwe dollar balances into the new currency which shall be called Zimbabwe Gold (ZiG) to foster simplicity, certainty, and predictability in monetary and financial affairs. The new currency will co-circulate with other foreign currencies in the economy;
- The swap rate will be guided by the closing interbank exchange rate and the price of gold as at 5 April 2024. The swap rate shall be used to make legitimate conversions of all ZW$ deposits in the banking sector; all ZW$ loans and advances made by the sector; ZW$ Treasury Bills; all outstanding auction allotments; all export surrender obligations; all prices of goods and services in ZW$; and any other ZW$ denominated obligations;
- On conversion of all current ZW$ balances, banks are directed to rename all the current ZW$ accounts as ZiG accounts. Gold-backed digital token (GBDT) accounts will no longer be called ZiG accounts but will be known as GBDT accounts.
l All ZW$ notes and coins held by account holders will be credited into their ZiG accounts using the applicable conversion factor. The banks will continue to accept these deposits for a period of 21 days after 5 April 2024; - The Reserve Bank has made special arrangements for those without bank accounts to swap their ZW$ notes and coins at POSB and AFC Commercial Bank within 21 days after 5 April 2024; and
- In instances where the cash holding to be exchanged is above ZW$100 000, banks shall apply the requisite know your customer (KYC) and customer due diligence (CDD) principles.
