Z$ balances shrink in value on introduction of new ZiG currency
Prior to ZiG’s debut, a Zimbabwean with Z$1 million would have received US$29 at the official exchange rate of Z$33,903 per USD.
Post-introduction, on the same day, the same amount translates to US$24, based on the central bank’s conversion formula which involves dividing the interbank forex rate into ZWL by the foreign currency exchange rate into ZiG.
On Friday, the central bank set the foreign exchange rate at US$1 to ZWL33,903 and US$1 to ZiG13.5616.
In a dramatic move to tackle inflation, the official rate was adjusted to US$1: Z$33,903 from US$1: Z$22,050 just two days prior.
RBZ Governor John Mushayavanhu announced the new currency in his monetary policy statement, emphasizing that it was backed by a basket of reserves, predominantly gold, to introduce “simplicity, certainty, and predictability” in the nation’s financial system.
The depreciating Zimbabwe dollar, which lost 75% of its value this year, will be phased out in favor of ZiG.
“Effective today, banks will convert existing Zimbabwe dollar balances to the new currency,” Mushayavanhu declared.
ZiG will be available in denominations ranging from 1ZiG, 2ZiG, 5ZiG, 10ZiG, 20Zig, 50ZiG, 100ZiG, and 200ZiG and distributed via banks. Smaller coins will be introduced to alleviate the scarcity of US coins.
The currency is set to circulate from April 8, with a transition period for mobile and money transfer services ending Monday.
The ZiG’s value is pegged to the day’s gold price, equating 1 ZiG to approximately US$0.06, or 13.6 to the USD.
Mushayavanhu assured that ZiG would coexist with other foreign currencies, maintaining the multi-currency system until 2030.
With US$100 million in cash and 2,522 kgs of gold reserves, the RBZ plans a market-driven exchange rate.
Mushayavanhu is hopeful that these steps will effectively rein in the country’s soaring inflation. Zimbabweans have a historic mistrust of the central bank, dating back to 2008, when it was printing Z$10tn notes while inflation had run out of control.
