The introduction of the Zimbabwe Gold (ZiG) as the country’s new currency is a critical step in the government’s long term de-dollarisation agenda, Finance Minister Mthuli Ncube said today.
In a ministerial statement in Parliament, Ncube said the ZiG, which was introduced on 5 April was aimed at bringing stability to the market.
The local currency had been in a free fall from January dropping from $6 192.4022 on 2 January to $30 674.3204 on 5 April.
Zimbabwe is using multiple currencies until the end of 2030.
Inflation rose from 34.8% inJanuary to 55.3% in March.
The central bank expects it to drop to less than 5% by the end of the year.
Below is the full statement:
THE MINISTER OF FINANCE, ECONOMIC DEVELOPMENT AND INVESTMENT PROMOTION (HON. PROF. M. NCUBE): Thank you Madam Speaker Ma’am, for allowing me to stand in this august House regarding the recent Monetary Policy Statement Announcement which has resulted in the launch of a new currency.
The Governor of the Reserve Bank of Zimbabwe presented the Monetary Policy Statement on the 5th of April 2024 in terms of Section 46 of the Reserve Bank Act. The major import of the Monetary Policy Statement is to address the exchange rate and inflation volatilities which have largely been driven by factors such as high demand for foreign currency as a store value, reduced confidence due to continued currency volatility seen in recent months, and a widening margin between the interbank and the parallel market exchange rates.
Other factors included the reduced use of the local currency for domestic transactions and finally factors such as the lack of certainty and predictability on the exchange rate front. These are some of the factors impacting exchange rate and inflation volatilities.
To ensure long-term macro stability, the RBZ announced currency reforms which will be complemented by other fiscal and additional monetary measures to restore currency and exchange rate stability. The new policy framework will be implemented sequentially to ensure lasting stability, certainty and predictability, thereby achieving the desired impact of influential monetary currency and exchange rate stability.
Madam Speaker Ma’am, let me take this opportunity to highlight the summary of the major contents of the Monetary Policy Statement.
Madam Speaker, the Reserve Bank introduced a structured currency which is generally defined as a currency that is pegged to a specific exchange rate or currency basket and backed by a bundle of foreign exchange assets such as gold for example. This means that the Central Bank can only issue domestic notes and coins when fully backed by a foreign reserve currency or foreign exchange assets and that the currency is fully convertible into the reserve currency on demand. The structured currency is anchored by a composite or basket of foreign currency and precious metals and in our case, mainly gold which is held as reserves for this purpose by the Reserve Bank.
Let me now turn on to the currency swap and conversion mechanism. The new currency known as the Zimbabwe Gold (ZiG) became effective on 5th April, 2024, therefore banks have already begun to convert the current Zimbabwe balances into the new currency.
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