By Bahle Gama
In its sixth attempt to have a functional local currency, Zimbabwe will be replacing the Zim Dollar with a new currency.
According to the International Monetary Fund (IMF), this attempt has been happening since 2008 when inflation crossed 500 billion per cent, rendering the currency worthless.
Zimbabwe President Emmerson Mnangagwa first hinted in February that his government will introduce a “structured currency.” The plan was delayed giving the final touches.
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Mushayavanhu, who took over as central bank governor on March 28 a month earlier than the initial start date pledged a return to more orthodox monetary policies.
In a press statement, Zimbabwe Central Bank Governor John Mushayavanhu said in the latest bid to end the serial slide of the local dollar, the country replaced it with a new unit called the ZiG short for Zimbabwe Gold backed by a basket of foreign currency and gold.
The new currency will be launched on Monday, April 8 at an introductory level of 13.5 per dollar, and a new interest rate set at 20 per cent.
This according to the governor compares with the 130 per cent on the old unit, which was the highest central bank rate in the world, and banks will immediately covert the current Zimbabwean dollar balances into ZiG.
The Rand is currently trading around E18.60 to the Zim dollar.
“It does not help to print money and certainly under my watch, it is not going to happen. We want a solid and stable national currency in this country,” said the governor.
He further stated that to foster demand for the ZiG, Zimbabwe will make it mandatory for companies to settle at least 50 per cent of their tax obligations through the new unit.
The governor said the currency changes are expected to cool Zimbabwe’s annual inflation to between 2 per cent and 5 per cent by year-end and monthly to below 1 per cent.
The Zimbabwean dollar has reportedly lost four-fifths of its value on the official market since the start of the year, making it the world’s second worst-performing currency.
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It has led to more than 80 per cent of transactions being done in dollars and inflation quickening to 55.3 per cent in March from 47.6 per cent the previous month.
“We are not going to be involved in any quasi-fiscal activities, I have no intention to do other people’s jobs,” he said.
He further stated that to rebuild confidence, the ZiG will be fully backed by a combination of gold and other precious metals, plus foreign currency reserves held at the central bank.
Further explaining the changes, Mushayavanhu said that reserves currently include E5 million (Zim$100 million) in cash and 2,522 kilograms of gold worth E9.2 million (Zim$185 million).
Meanwhile, the total amount of gold and cash reserve holdings of E5.2 billion (US$285) million represents more than three times the cover for the ZiG currency to be issued.
