HARARE
–
Zimbabwe
will
introduce
a
new
“structured
currency”
linked
to
foreign
currencies
and
gold
that
it
expects
to
provide
more
stability
than
its
weakening
dollar
and
help
rein
in
inflation,
new
central
bank
governor
John
Mushayavanhu
said
on
Friday.
As
the
Zimbabwean
dollar
tumbled
this
year
from
under
6,000
to
above
33,000
to
the
U.S.
dollar,
annual
inflation
soared
beyond
55
percent
in
March,
evoking
bitter
memories
of
hyperinflation
over
a
decade
ago.
The
new
currency
–
called
Zimbabwe
Gold
(ZiG)
–
will
be
backed
by
foreign
currencies,
gold
and
precious
minerals,
Mushayavanhu
told
a
press
conference
in
Harare,
adding
that
it
would
circulate
alongside
a
basket
of
other
currencies.
He
said
the
central
bank
would
also
introduce
a
market-determined
exchange
rate.
“If
we
implement
these
measures,
we
expect
them
to
have
an
impact
on
inflation,”
Mushayavanhu
said.
The
central
bank
also
set
its
main
interest
rate
at
20
percent,
which
it
said
was
a
re-calibrated
rate,
a
drastic
cut
from
the
previous
rate
of
130
percent.
Finance
Minister
Mthuli
Ncube
said
in
February
that
authorities
were
considering
linking
the
exchange
rate
to
hard
assets
such
as
gold
and
creating
a
currency
board.
The
announcement
is
the
culmination
of
months
of
deliberations
between
the
central
bank
and
finance
ministry
about
how
to
arrest
inflation
and
stabilise
the
Zimbabwean
dollar.
“This
recalibrated
monetary
policy
framework
aims
to
address
the
current
state
of
price
and
exchange
rate
instability
in
the
economy.
It
is
informed
by
two
strategic
policy
pillars
of
restoring
price
and
exchange
rate
stability,
and
re-monetising
the
local
currency
for
it
to
serve
its
role
as
a
medium
of
exchange
and
a
store
of
value
in
a
multi-currency
system.
The
policy
seeks
to
rebuild
market
confidence
and
trust,
as
well
as
bank
policy
credibility,”
Mushayavanhu
said.
“The
sequential
approach
will
be
anchored
on
five
policy
measures:
adoption
of
a
market-determined
exchange
rate
system;
efficient
and
optimal
money
supply
management;
introduction
of
a
new
structured
currency;
anchoring
local
currency
on
reserves
backed
by
gold
and
foreign
currency
balances
and
support
measures
and
obligations
in
response
to
market
demands.”
Mushayavanhu
said
the
auction
system
used
to
determine
daily
exchange
rates
for
the
Zimbabwe
dollar
has
been
replaced
by
a
refined
interbank
foreign
exchange
market
under
a
willing-buyer-willing-seller
(WBWS)
trading
arrangement.
“Following
this
development,
a
transparent
price
discovery
mechanism
is
now
in
place
in
the
interbank
market.
The
Bank
will
continue
to
provide
trading
liquidity
to
the
market
using
the
25
percent
surrender
proceeds
from
exports,”
he
said.
The
central
bank
would
strictly
adhere
to
statutory
limits
on
bank
lending
to
the
government,
he
said,
partly
blaming
“quasi-fiscal
activities”
for
past
instability,
adding
that
these
would
be
“discontinued.”
Starting
next
Monday,
Mushayavanhu
said
Zimbabweans
can
swap
their
old
Zimbabwe
dollar
bank
notes
for
ZiG
notes
for
the
next
21
days.
Banks
were
directed
to
convert
current
Zimbabwe
dollar
balances
to
the
ZiG.
“The
swap
rate
will
be
guided
by
the
closing
interbank
exchange
rate
and
the
price
of
gold
as
at
April
5,
2024,”
he
said.
The
ZiG
opened
with
an
exchange
rate
of
US$1
:
13.5616
ZiG.
Based
on
the
interbank
rate
of
US$1
:
ZWL33,903
on
Friday,
1
ZiG
was
worth
ZWL2499.
The
ZiG
notes
and
coins
will
be
issued
in
denominations
made
up
of
1ZiG,
2ZiG,
5ZiG,
10ZiG,
20Zig,
50ZiG,
100ZiG,
and
200ZiG.
Coins
of
half
ZiG
and
quarter
ZiG
are
also
currently
being
minted.
Mushayavanhu
said
as
of
Friday,
the
RBZ’s
reserve
asset
holdings
comprise
of
US$100
million
in
cash
and
2.522
tonnes
of
gold
worth
US$185
million
to
back
the
entire
local
currency
component
of
reserve
money
which
currently
stands
at
ZW$2.6
trillion
requiring
full
cover
of
gold
and
cash
reserves
amounting
to
US$90
million.
The
total
amount
of
gold
and
cash
reserve
holdings
of
US$285
million
represents
more
than
three
times
cover
for
the
ZiG
currency
being
issued,
he
said.
He
said
the
starting
exchange
rate
of
the
ZiG
would
be
determined
by
the
prevailing
closing
interbank
exchange
rate
as
at
April
5,
and
the
London
PM
Fix
price
of
gold
as
at
April
4,
2024.
“The
intervening
exchange
rate
shall
be
determined
by
the
inflation
differential
between
ZiG
and
USD
inflation
rates
and
the
movement
in
the
price
of
the
basket
of
precious
minerals
held
as
reserves.
The
weights
will
be
determined
by
the
composition
of
reserve
assets,”
he
explained.
He
said
the
RBZ
would
apply
measures
to
gradually
promote
the
increased
use
of
the
new
currency,
including
making
it
mandatory
for
companies
to
settle
at
least
50
percent
of
their
tax
obligations
on
quarterly
payments
dates
in
ZiG.
IN
FULL: 2024
Monetary
Policy
Statement