Making the ZiG work

ZIMBABWE last week unveiled a new local currency — Zimbabwe Gold (ZiG) — which will be injected into circulation by the Reserve Bank of Zimbabwe (RBZ) at the end of this month.

The structured currency comes as part of comprehensive monetary measures meant to consolidate economic stability, tame inflationary pressures fuelled by market indiscipline over the years and facilitating robust business growth grounded in savings.

Structured currency is a medium of exchange that is pegged to a specific exchange rate or currency basket and backed by a bundle of foreign exchange assets, among them gold.

In this case, the RBZ can only issue domestic notes and coins when they are full backed by a foreign “reserve” currency or foreign exchange assets and the currency is fully convertible into the reserve currency on demand.

According to the Central Bank, the structured currency is different from the Zimbabwe dollar in that it is anchored or backed by a composite basket of foreign currency and precious metals.

However, between now and then, the Zimbabwe dollar remains legal tender for all domestic transactions until the currency — with denominations of 1, 2, 5, 10, 50, 100 and 200 notes and coins for half and a quarter ZiG —come into circulation as the new currency.

As we go through the smooth transition of the currency changeover, there must be no inconveniences that are counterproductive and disadvantage the transacting public. This will help to ensure that there is price and exchange rate stability in the retail sector.

Until the issuance of the ZiG notes and coins, RBZ will be conducting extensive educational and awareness campaigns to sensitise the public on the new currency’s structure and security features before its release.

It becomes imperative that traders, transporters and the public must continue accepting and transacting in the Zimbabwe dollar.

ZiG is a strong and stable currency as it will be able to retain value, with the Central Bank putting in place measures such as maintaining a tight monetary policy stance, floating the exchange rate and occasionally intervening to support the currency. Over and above all else, the currency is firmly anchored on foreign exchange and precious metals — mainly gold — which often appreciates in value.

To ensure that it remains steady and sturdy, the apex bank’s reserve asset holdings comprise US$100 million in cash and 2 522kg of gold worth US$185 million to back the entire local currency component of reserve money.

As a measure to promote ZiG, it will become a requirement for 50 percent of quarterly payment dates (QPDs) tax obligations to be payable in local currency.

There is, therefore, every need to embrace the use of ZiG. To buttress that, there are indications from Treasury that along the way there will come a point when fuel will be sold in ZiG, and all duties will also be payable in local currency. Government ministries, departments and agencies shall also be accepting ZiG.

It is important, however, to understand that this is not de-dollarisation as the multi-currency system is still in place because this is a position that was agreed between Government and industry.

With Government laying solid ground to promote the use of ZiG, there is no need to unnecessarily panic and create a crisis of confidence.

Over 90 percent of institutions and mobile bank service providers have successfully configured their systems and processes in line with the monetary policy guidelines, paving the way for smooth transactions using the newly introduced ZiG currency.

The enthusiasm from the business community and the public to readily embrace the new currency must be commented. The majority or retail outlets have already pegged and are displaying their prices pegged in ZiG.

It is encouraging to note that the market is readying to commence digital transactions as most business have successfully switched the prices of their goods and services to ZiG.

By so doing, confidence in the local currency and safe-guarding of the multi-currency regime will undoubtedly be restored.

Any speculative tendencies or behaviour by unscrupulous businesses and traders, bordering on profiteering is retrogressive and must be nipped in the bud. Unfair trading practices only short-change consumers and those are bad business practices.

ZiG deserves a chance, and any behaviour contrary to sound business principles that scuttles the use of local is tantamount to economic sabotage.