Madam Speaker, the swap rate is guided by the closing interbank exchange rate and the price of gold in the London bullion market as at 5 April, 2024. The local currency is being converted into ZiG or Zimbabwean Gold by first of all converting the Zimbabwe dollar balances as at 5 April, 2024 to USD balances at the end of the day at exchange rate of 1:33 903. So that is the first phase of the process. Then second, converting the equivalent resultant USD balances into ZiG balances at a rate of 1:13.56 ZiG. So, US$1 per 13.56 ZiG, that is the exchange rate.
If I can pause a little further to explain; 1 ZiG Madam Speaker, is equivalent to 1mg of gold and that amounts to about USD 6c and when we work that one out, you will see why you end up with an exchange rate of US$1 to 13.56 ZiG. It all starts from the international London bullion gold price. This rate is being used to make a legitimate conversion of all Zimbabwe dollar deposits in the banking sector, all Zimbabwe dollar loans and advances made by the sector, all Zimbabwe dollar Treasury bills and all outstanding auction allotments, all export surrender obligations, all prices of goods and services in Zimbabwe dollars and any other Zimbabwe dollar denominative obligations.
Madam Speaker, on conversion of all current Zimbabwean dollar balances, banks are renaming all the current Zimbabwe dollar accounts as ZiG accounts. The old gold backed digital coin or token accounts, with the acronym GBDT accounts are no longer called ZiG accounts but are now known as GBDD accounts. All Zimbabwe dollar notes and coins held by account holders are being credited into their ZiG accounts using the applicable conversion factor which I have already described.
The banks will continue to accept these deposits for a period of 21 days after 5 April 2024, but Madam Speaker, I have been made aware that we may even need to extend that period. That is okay so that we can give our citizens, especially in the rural areas that need to travel and be able to convert their Zimbabwe dollars into ZiG currency.
The Reserve Bank has made special arrangements for those without bank accounts to swap their Zimbabwe dollar notes and coins at POSB and AFC commercial bank within 21 days, obviously after 5th April, 2024. Madam Speaker, in instances where the cash holding to be exchanged is above ZWL100 000, banks shall apply the requisite ‘know your customer or KWC’ and customer due diligence principles.
Let me turn to the issuance of the new notes and coins. The introduction of the new structured currency naturally requires the issuance of new bank notes to facilitate transactions in the economy, specially to cater for small transactions and to ensure the availability of change. ZiG notes and coins shall be issued in denominations made out of 1 ZiG, 2 ZiG, 5 ZiG, 10 ZiG, 20 ZiG, 50 ZiG, 100 ZiG and 200 ZiG which will be distributed through the usual normal banking channels and will be fully covered by the quantity and value of gold and foreign currency held as reserves.
Madam Speaker, ZiG shall at all times be anchored and fully backed by a composite of basket of reserves comprising foreign currency and precious metals mainly gold, I repeat, but there are also diamonds which are received by the Reserve Bank as part of the in-kind royalties and kept in the volts of the bank.
Foreign currency balances will be accumulated through market purchases, and from the 25% surrender requirements as well as sale of some precious metals received as royalties. As of 5 April, 2024, the bank which is the RBZ had reserve assets of US$100 million in cash and 2522kg of gold valued at about US$185 million to back the entire local currency component of reserve money which currently stands at 2.6 trillion as of Friday, requiring full cover of gold and cash reserves amounting to US$90 000 000.
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