RBZ satisfied with currency switch progress

The Reserve Bank of Zimbabwe (RBZ) on Saturday noted satisfactory progress made by some financial institutions in migrating their systems from the Zimbabwe dollar to Zimbabwe Gold (ZiG), the country’s new medium of exchange.

This comes as the transacting public at the weekend faced some bottlenecks as businesses worked flat-out to implement a currency changeover without major hassles,

Following the presentation of the 2024 Monetary Policy Statement on Friday by newly appointed Reserve Bank of Zimbabwe Governor, Dr John Mushayavanhu, the majority of financial services providers immediately suspended RTGS transactions to facilitate a rollover to the new currency.

This left many customers facing transaction challenges, with the majority of service providers insisting on cash transactions only while financial institutions synchronised their payment systems.

However, in an update on Saturday, the RBZ Governor Dr Mushavanhu said: “The Reserve Bank of Zimbabwe would like to advise that the banking sector and payment systems providers (PSP) have made satisfactory progress in converting the Zimbabwe balances into Zimbabwe Gold (ZiG) balances since the pronouncement of the Monetary Policy measures on April 5, 2024.

“The conversion process will continue for other economic sectors until Friday, April 12, 2024. Thereafter, the Reserve Bank expects that all the online payment platforms will be operating smoothly for all transactions in the economy.”

“As advised in the Monetary Policy Statement and Statutory Instrument 60 of 2024, the transacting public has a transitional period of up to 21 days to convert their Zimbabwe dollar notes and coins to ZiG. Accordingly, the Zimbabwe dollar notes and coins will continue to be used for transactional purposes at the ZiG: Zimbabwe dollar conversion factor of 2498.7242 applicable on April 8, 2024, within the 21-day transitional period.”

The apex bank is alive to currency divisibility challenges, where in some cases customers using US dollars are forced to take some small items from shops as change, while the element of torn notes has caused many challenges with some service providers declining to accept them.

Said Dr Mushayavanhu; “The ZiG notes and coins are in production and will start circulating in the economy on April 30, 2024, to allow the Reserve Bank to undertake an intensive educational and awareness campaign on the key security features of the ZiG notes and coins. The campaign is expected to reach out to a wide spectrum of society consistent with the Reserve Bank’s financial inclusion thrust.”

The RBZ said it was taking all necessary steps to ensure that the public was not prejudiced and there was value preservation and transactional convenience during this transitional period. During such changeover periods, some unscrupulous service providers take advantage of the situation to shortchange their customers.

“The Reserve Bank calls upon the public to exercise patience while the banking sector, the business community and the rest of the economy are transitioning to the new normal,” said Dr Mushayavanhu.

Speaking to Herald Finance and Business on Saturday, RBZ member of the Monetary Policy Committee, Mr Persistence Gwanyanya, implored the transacting public to be patient as the monetary authorities superintended on the currency switch.

“There are timelines that have been put in place by the authorities. We implore the service providers to abide by them to ensure a smooth change over to the new currency. We do not expect the service providers to work outside these parameters,” he said.

The Confederation of Zimbabwe Retailers (CZR) president, Mr Danford Mutashu at the weekend, said the organisation welcomed the introduction of the new currency that sought to stabilise prices and exchange rates.

“The macro-economic stability is key in the achievement of the country’s vision of the upper middle-income economy by 2030 hence the retailers and wholesalers believe new policy measures by Dr Mushayavanhu will ensure price stability in the market. Therefore, prices of basics commodities in retail shops and wholesalers should be in line with the exchange rate movement.

“Given that gold is considered as a safe haven and store of value for most nations, prices are expected to be stable. As retailers, we are urging all our members to take note of the MPS recommendations and start converting their prices into ZiG from the Zimbabwe dollar prices,” he said.

Some organisations, including members of the CRZ have been accused of refusing to comply with monetary authorities’ regulations before and a number have been fined by the RBZ’s Financial Intelligence Unit before.

Said Mr Mutashu: It’s important to note that the introduction of a new currency can have wide-ranging effects on various aspects of the economy, including inflation, exchange rates and public confidence in the monetary system. As such, the implementation and reception of the new ZiG currency will be closely monitored.”

Dr Mushayavanhu unveiled the country’s new structured currency, ZiG last Friday, as part of several policy measures expected to arrest exchange rate volatility, curtail inflation and bring economic stability.

Presenting his inaugural MPS, Dr Mushayavanhu said the bank was recalibrating its monetary policy framework to address the current state of price and exchange rate instability in the economy.

He said the policy stance was informed by two strategic policy pillars of restoring price and exchange rate stability and re-monetising the local currency for it to serve its role as a medium of exchange and a store of value.

He also said the policy framework sought to rebuild market confidence and trust, as well as bank policy credibility.

Dr Mushayavanhu praised the previous efforts of the Government and central bank saying they made significant strides in sustaining an optimal currency mix in the multi-currency system.

He said that the exchange rate and inflation volatilities experienced in the economy continued to threaten the prospects of the local currency under the multi-currency system, hence the coterie of proposed new measures in the MPS, including the new currency.

Said Dr Mushayavanhu on Friday: “The Reserve Bank is introducing 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 (potentially including gold).

“This means that a 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 being introduced is anchored by a composite basket of currency and precious metals (mainly gold) held as reserves for this purpose by the Reserve Bank.

Dr Mushayavanhu said the strong macroeconomic fundamentals prevailing in the economy, as reflected by persistent surpluses in the balance of payments, fiscal sustainability, and a bullish mining sector, would support the new local currency.

The ZiG has therefore replaced the Zimbabwe dollar. Statutory Instrument… was swiftly issued yesterday to give effect to the new currency.

All Zimbabwe dollar balances will thus be converted to ZiG at the ruling official rate. Dr Mushayavanhu said the ZiG will have a starting exchange rate of 13,56.16 to the US dollar.

Thereafter, the willing buyer willing seller interbank market exchange rate will be used to convert into the country’s newly introduced structured currency.-herald