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Rwanda-Zimbabwe Business Forum to boost trade ties – CNBCAfrica.com

Exploring Rwanda’s and Zimbabwe’s trade and investment landscape, opportunities and challenges in this episode of Doing Business in Rwanda with a focus on identifying and capitalizing on emerging trends and market dynamics in the two nations.

Tue, 02 Apr 2024 07:48:42 GMT

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De-dollarization: Zimbabwe introduces gold-backed currency – Business Insider

Zimbabwe just introduced a new gold-backed currency in an attempt to fight inflation and wean off the US dollar

John Mushayavanhu, Governor of the Reserve Bank of Zimbabwe, presents the new national currency Zimbabwe Gold, or ZiG.

Angle down icon
An icon in the shape of an angle pointing down.

John Mushayavanhu, Governor of the Reserve Bank of Zimbabwe, presents the new national currency Zimbabwe Gold, or ZiG.


Columbus Mavhunga/picture alliance/Getty Images




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  • Zimbabwe’s central bank has introduced a new gold-backed currency, ZiG, to combat high inflation.
  • This is Zimbabwe’s sixth attempt at a new currency since 2008.
  • The African nation is aiming to phase out its multi-currency system where the US dollar is dominant.

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Inflation-hit Zimbabwe has a new currency — again.

Last week, the country’s central bank introduced a new gold-backed currency called Zimbabwe Gold, or ZiG, in an attempt to tame price gains that reached a seven-month high of 55% in March.

It’s the country’s sixth attempt at creating a new currency since 2008. The Zimbabwe dollar — the currency the country most recently used — has tanked 80% this year alone.

There’s been so little confidence in Zimbabwe’s local currency that about 80% of the country’s population transacts in the US dollar.

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On Thursday, Zimbabwe’s central bank governor, John Mushayavanhu, said the country has real gold and mineral assets to back up the new ZiG currency. Mushayavanhu said Zimbabwe’s central bank holds 2.1 tons of gold and other assets, including diamonds, that are equivalent to 0.4 tons of gold, according to Voice of America.

The ZiG started trading on Monday at an exchange rate of 13.56 to the dollar set by the central bank.

Reservations about Zimbabwe’s new currency

There are reservations about the new ZiG currency.

In a note on Sunday, Hasnain Malik of research firm Tellimer wrote that Zimbabwe’s economy needs fundamental fixes like reductions in fiscal deficit and external debt, not a new currency.

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However, moving to the new ZiG currency could solve at least one problem, for a start: a shortage of US coins.

Zimbabwe’s shortage of US coins has resulted in people receiving their change in sweets, chocolates, and pens, according to the BBC.

Zimbabwe has been trying to wean itself off the US dollar

If successful, ZiG may be able to replace some — if not all — transactions that currently take place with the US dollar.

Zimbabwe has already applied for membership to the BRICS’s New Development Bank, which is seeking to expand the use of local currency loans.

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Zimbabwe’s central bank said in its 2024 monetary policy statement, released last week, that it will be preparing a “structured roadmap to gradually promote the increased use of the new local currency.”

For a start, it’s making it compulsory for companies to settle at least half of their quarterly taxes in ZiG, according to the central bank report.

The African country has been trying to wean itself off the US dollar for years, with little success. The country has seen runaway inflation due to years of economic mismanagement under its former leader, Robert Mugabe.

At one point in 2008, annual inflation reached 500 billion percent, according to the International Monetary Fund.

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Zimbabwe’s government banned the use of foreign currencies as legal tender in 2019. The country’s former central bank governor said at the time that the country’s economy was “at the mercy of US dollar pricing, which has been a root cause of inflation,” the BBC reported.

The country was forced, however, to reverse the ban in June 2022 to rein in inflation.

The government had initially planned to end the multi-currency system in 2025, but extended it until 2030.


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De-dollarization: Zimbabwe introduces gold-backed currency – Business Insider

Zimbabwe just introduced a new gold-backed currency in an attempt to fight inflation and wean off the US dollar

John Mushayavanhu, Governor of the Reserve Bank of Zimbabwe, presents the new national currency Zimbabwe Gold, or ZiG.

Angle down icon
An icon in the shape of an angle pointing down.

John Mushayavanhu, Governor of the Reserve Bank of Zimbabwe, presents the new national currency Zimbabwe Gold, or ZiG.


Columbus Mavhunga/picture alliance/Getty Images




p” class=”inline-offer pre-churn-offer”>


  • Zimbabwe’s central bank has introduced a new gold-backed currency, ZiG, to combat high inflation.
  • This is Zimbabwe’s sixth attempt at a new currency since 2008.
  • The African nation is aiming to phase out its multi-currency system where the US dollar is dominant.

Advertisement

Inflation-hit Zimbabwe has a new currency — again.

Last week, the country’s central bank introduced a new gold-backed currency called Zimbabwe Gold, or ZiG, in an attempt to tame price gains that reached a seven-month high of 55% in March.

It’s the country’s sixth attempt at creating a new currency since 2008. The Zimbabwe dollar — the currency the country most recently used — has tanked 80% this year alone.

There’s been so little confidence in Zimbabwe’s local currency that about 80% of the country’s population transacts in the US dollar.

Advertisement

On Thursday, Zimbabwe’s central bank governor, John Mushayavanhu, said the country has real gold and mineral assets to back up the new ZiG currency. Mushayavanhu said Zimbabwe’s central bank holds 2.1 tons of gold and other assets, including diamonds, that are equivalent to 0.4 tons of gold, according to Voice of America.

The ZiG started trading on Monday at an exchange rate of 13.56 to the dollar set by the central bank.

Reservations about Zimbabwe’s new currency

There are reservations about the new ZiG currency.

In a note on Sunday, Hasnain Malik of research firm Tellimer wrote that Zimbabwe’s economy needs fundamental fixes like reductions in fiscal deficit and external debt, not a new currency.

Advertisement

However, moving to the new ZiG currency could solve at least one problem, for a start: a shortage of US coins.

Zimbabwe’s shortage of US coins has resulted in people receiving their change in sweets, chocolates, and pens, according to the BBC.

Zimbabwe has been trying to wean itself off the US dollar

If successful, ZiG may be able to replace some — if not all — transactions that currently take place with the US dollar.

Zimbabwe has already applied for membership to the BRICS’s New Development Bank, which is seeking to expand the use of local currency loans.

Advertisement

Zimbabwe’s central bank said in its 2024 monetary policy statement, released last week, that it will be preparing a “structured roadmap to gradually promote the increased use of the new local currency.”

For a start, it’s making it compulsory for companies to settle at least half of their quarterly taxes in ZiG, according to the central bank report.

The African country has been trying to wean itself off the US dollar for years, with little success. The country has seen runaway inflation due to years of economic mismanagement under its former leader, Robert Mugabe.

At one point in 2008, annual inflation reached 500 billion percent, according to the International Monetary Fund.

Advertisement

Zimbabwe’s government banned the use of foreign currencies as legal tender in 2019. The country’s former central bank governor said at the time that the country’s economy was “at the mercy of US dollar pricing, which has been a root cause of inflation,” the BBC reported.

The country was forced, however, to reverse the ban in June 2022 to rein in inflation.

The government had initially planned to end the multi-currency system in 2025, but extended it until 2030.

Advertisement

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Zimbabwe’s new ZiG currency starts trading amid big doubts | Business – News24

(Mark Rubens/Getty Images)

(Mark Rubens/Getty Images)


Zimbabwe’s new gold-backed currency started trading on Monday amid doubts that the country’s third such re-launch in a decade will have any more success in ending repeated, crippling bouts of high inflation.

The Zimbabwe Gold (ZiG) was announced on Friday by the central bank with an initial rate of 13.56 to $1, replacing the Real Time Gross Settlement Dollar (RTGS), which had lost about 80% of its value this year and had been trading at 28,720 to $1 before the change.

Bank balances were transferred into the new currency over the weekend while their customers will have 21 days to do so, and the new banknotes will enter circulation at the end of this month, according to the Reserve Bank of Zimbabwe.

The RTGS, also known as the Zimdollar, was launched in 2019 after a decade of dollarisation, which included so-called bond coins and bond notes, notionally pegged to the U.S. dollar and introduced in 2014 and 2016 respectively.

However, the Zimdollar struggled to gain trust and this year’s precipitous slide pushed annual inflation above 55% in March, raising fears of a return to the 2007-2009 era of hyperinflation under former president Robert Mugabe.

“There was dire need for drastic change in the Zimbabwean monetary system,” Jacques Nel at research firm Oxford Economics said in a note to clients.

The central bank statement on Friday correctly identified the most pressing problems, said Nel. “A lack of credibility in both the domestic currency and the framework that governed it – but it is that same lack of credibility that casts doubt over the effectiveness of these new measures,” he added.

Commercial banks were using the new official exchange rate on Monday, according to Reuters enquiries. It was not immediately clear whether the currency, which the central bank described as “structured” and “anchored by a composite basket of foreign currency and precious metals (mainly gold) held as reserves”, would be able to retain this value.

Nor was it given that companies and citizens would accept it as a form of payment and a store of value. Some 80% to 85% of transactions are currently carried out in foreign currencies, according to the central bank.

“Zimbabwe has an insufficient $285 million of hard currency and gold reserves,” Hasnain Malaik of research firm Tellimer said in a note. “To fix the economy, Zimbabwe needs to address these root causes of its problems.”

These problems include central bank funding of government, unsustainable fiscal deficits, debt arrears and Western sanctions, and Malaik said it was not clear whether any would be addressed under the current ruling ZANU-PF party.

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