Zimbabwe made gold legal tender and reintroduces gold standard

[pmbug]

ZiG is partly gold-backed, which begs the question, how much?

See point 162 in last quote in post #98:

Zimbabwe made gold legal tender and reintroduces gold standard

https://www.miningweekly.com/print-version/zimbabwe-central-bank-accumulates-almost-a-ton-of-gold-reserves-2024-02-13#:~:text=Zimbabwe%E2%80%99s%20central%20bank%20accumulated%20793%20kilograms%20%2825%2C000%20ounces%29,pay%20part%20of%20their%20royalties%20using%20the%20metal.

www.pmbug.com

 

[Peter89]

See point 162 in last quote in post #98:

Zimbabwe made gold legal tender and reintroduces gold standard

https://www.miningweekly.com/print-version/zimbabwe-central-bank-accumulates-almost-a-ton-of-gold-reserves-2024-02-13#:~:text=Zimbabwe%E2%80%99s%20central%20bank%20accumulated%20793%20kilograms%20%2825%2C000%20ounces%29,pay%20part%20of%20their%20royalties%20using%20the%20metal.

www.pmbug.com

"162. As of 5 April 2024, the Bank has reserve assets of USD 100 million in cash and 2,522 kgs of gold (US$185 million) to back the entire local currency component of reserve money which currently stands at ZW$2.6 trillion requiring full (100%) cover of gold and cash reserves amounting to US$90 million. The gold and cash reserve holdings currently with the Bank represent more than 3 times cover for the local currency being issued."

It says the ZiG is backed by gold & cash, i.e. the ZiG is by definition partly backed by gold.
Bank reserves assets - both the cash and the gold component - change in time, so nothing prevents the gold reserves to decrease in the future so much that de facto the ZiG could become only e.g. 10% backed by gold.



I miss something like "Each ZiG unit is 100% backed by gold"
And how about this one: "Each ZiG unit is redeemable against x grams of gold"
After all this is how a gold backed currency works

 

[searcher]

Zimbabwe Will Convert Annual Budget to Reflect New Currency​

Zimbabwe will convert its annual budget to its gold-backed currency, the ZiG, which went into circulation last month, Finance Minister Mthuli Ncube said.

“That should be ready at the end of the month, beginning of next month we will be able to show you the ZiG equivalent of the budget,” Ncube told lawmakers at the nation’s parliament in Mount Hampden.

More:

Bloomberg - Are you a robot?

 

[pmbug]

@Peter89 - I think your concern is largely echoed by everyone that is skeptical of the Zimbabwe government and RBZ. Words are cheap (even cheaper than fiat). Time will tell.

 

[Peter89]

@Peter89 - I think your concern is largely echoed by everyone that is skeptical of the Zimbabwe government and RBZ. Words are cheap (even cheaper than fiat). Time will tell.

... yes... probably I'm being to harsh on them...

They did a gigantic step towards sound money,
actually Zimbabwe is currently AFAIK the only country in the world with a currency which is officially - partly or not partly - backed by gold.

Well done Zimbabwe gov!

 

[searcher]

Zimbabwe to fine those not using official ZiG rate | Business

Zimbabwe will penalise individuals and companies which don’t use the prevailing official foreign-exchange rate of its new ZiG currency for transactions.

www.news24.com

 

[pmbug]

A serious shortage of Zimbabwe Gold (ZiG) has hit the market despite monetary authorities releasing notes and coins last month amid fears the crunch will affect aggregate demand.

The Reserve Bank of Zimbabwe (RBZ) started circulating ZiG notes and coins last monthend. The ZiG replaced the Zimbabwean dollar, which had lost three-quarters of its value this year.

A survey conducted by Standardbusiness last week showed that ZiG notes were not readily available through banks. Shortages were observed in various sectors including transport, supermarkets and the informal market.

The situation is causing disruptions to businesses.

“We do not have enough ZiG from the central bank,” economist Gift Mugano told Standardbusiness.

“The size of the money supply is about ZiG$90 million and the size of our economy is about ZiG$ 20 billion.

“So, the question is how does the government liquidate and expect to provide enough cash in the market when you have that small share of ZiG?

“The central bank has not printed enough ZiG.
...

More:

Cash shortages hit Zimbabwe

Cash shortages hit Zimbabwe

www.newsday.co.zw

Sounds like they did not execute the new currency introduction adequately.

 

[searcher]

Zim govt now wants mobile money services back - after blaming them for a currency crash | Business

Zimbabwe will allow mobile money agents, once blamed for fueling the collapse of its now defunct Zimbabwean dollar, to operate again to boost the use of its new gold-backed currency.

www.news24.com

 

[pmbug]

GOVERNMENT has deployed thirteen mobilization groups across the country in a bid to increase production of gold which is backing the recently introduced Zimbabwe Gold (ZiG) currency.

Speaking at the first Gold Mobilization workshop, Minister of Mines and Mining Development, Winston Chitando said the government aims to boost the gold reserves and strengthen the ZiG's value.

The mobilization groups were tasked to encourage small-scale miners to formalize their operations and sell their gold through official channels such as Fidelity Gold Refinery (FGR).

"Recently our currency was anchored on gold hence the need to ensure that all gold trade be done through the formal channels and eventually find its way to Fidelity Gold Refinery, our sole gold exporter.
...
"For 2024 from January to April, the gold deliveries to FGR sits at 8.4 tons against a target of 40 tons by the end of the year.

"It is imperative to note that for the first four months of 2024, the large-scale miners delivered 4.3 tons of gold to FGR against 3.4 tons for the year 2023 representing a 26% increase," he said.
...

https://www.msn.com/en-xl/africa/to...-for-new-gold-backed-zig-currency/ar-BB1mM8K6

 

[pmbug]

In its first public comment on Zimbabwe’s new gold-backed currency, the International Monetary Fund (IMF) has welcomed the introduction of the Zimbabwe Gold (ZiG) as a significant and positive policy action.
...
According to an IMF spokesperson, the introduction of the ZiG represents a major step forward, supported by important monetary, currency, and fiscal policy measures. This move is seen as a crucial step towards economic recovery and stability in Zimbabwe.

“The introduction of ZiG represents a significant policy action accompanied by several complementary policy changes, including monetary, currency and fiscal policy measures,” the Washington based IMF spokesperson told Bloomberg.
...

IMF endorses Zimbabwe's gold-backed currency, ZiG, as 'positive policy action' – Nehanda Radio

In its first public comment on Zimbabwe's new gold-backed currency, the International Monetary Fund (IMF) has welcomed the introduction of the Zimbabwe Gold (ZiG) as a significant and positive policy action.

nehandaradio.com

 

[nickndfl]

This was the last time gold was legal tender in the USA.

 

[pmbug]

The introduction of the world's newest currency in April inspired a reggae artist to record a song praising the ZiG, or Zimbabwe Gold.

The catchy tune, titled “Zig Mari,” received generous play on state television and radio. The musician, Ras Caleb, received a car and $2,000 — ironically paid in greenbacks, not the new ZiGs — from a businessman with close ties to Zimbabwe's ruling party and President Emmerson Mnangagwa; he said he wanted to reward an act he considered “patriotic.”
...

https://www.msn.com/en-us/news/worl...re-up-the-world-s-newest-currency/ar-BB1n42Uq

 

[searcher]

ZiG: Zimbabwe’s New Gold-Backed Currency Blighted by Trust Issues​

The Southern African country has attempted to introduce a new currency six times in the past 15 years to replace the Zimbabwean dollar. Each attempt has failed, resulting in huge losses in savings for people.

What Is the ZiG?​

In 2009, the Zimbabwe government legalized the use of several foreign currencies, including the U.S. dollar and the British pound, in everyday trade. The administration made the decision in an attempt to tame monthly inflation of 79.6 billion percent at the time.

Since then, however, Zimbabweans have been caught in a vicious cycle where a surrogate local currency is used to sponge away their U.S. dollar deposits before being decommissioned for a new currency.

Announcing the ZiG, short for Zimbabwe Gold, on Apr. 6, Reserve Bank of Zimbabwe governor John Mushayavanhu said:

“Banks shall convert the current Zimbabwe dollar balances into the new currency which shall be called Zimbabwe Gold (ZiG) to foster simplicity, certainty, and predictability in monetary and financial affairs.”

Remarkably, the new central bank governor’s tenure kicks off the ZiG era. His predecessor, John Mangundya, came with ‘bond notes’, pegged one-to-one with the U.S. dollar at the time, to ease cash shortages in 2016.

Mushayavanhu, who only became central bank governor on Mar. 28, 2024, revealed the ZiG is backed by $575 million in gold, foreign currency reserves, and other minerals. The new currency derives its name from a central bank-issued, gold-backed digital token now known as GBDT.

More:

https://www.msn.com/en-us/money/mar...currency-blighted-by-trust-issues/ar-BB1nc4qL

 

[pmbug]

...
In an interview, economist Ms Chipo Warikandwa said Zimbabwe's monetary authorities have managed to hold fort, containing inflationary pressures and exchange rate stability.

"Zimbabwe has experienced deflation for the first time in many months with consumer prices dropping by 2,4 percent in May while currency stability, the ZiG since its introduction, gained 1,9 percent against the United States dollar.

"Looking at the rate of inflation, authorities seem to be on track to achieve a rate of between 2 percent and 5 percent by the end of the year, all this is anchored on the monetary policy framework the country has adopted, therefore, the ZiG marks a new era for Zimbabwe's economy with potential for redefinition of growth," she said.

https://www.msn.com/en-xl/africa/to...zig-effect-on-stability-inflation/ar-BB1o5Shm

Not sure how that is possible given the reports about challenges the ZiG faced with local skepticism and such, but kudos if it's true.

 

[nickndfl]

They might need to add some shrunken heads and elephant tusks to the vault as a gimmick to prove they are for real this time.

 

[pmbug]

Ronan Manly wrote a fairly comprehensive look at the Zimbabwe experiment (covering most of the issues discussed in this thread):

Zimbabwe’s new gold-backed currency: Can the ZiG restore confidence and stability?

Zimbabwe has launched a new circulating currency, backed by gold and foreign exchange assets. But will it be successful?

www.bullionstar.com

(It's way to long to quote just a snippet)

 

[pmbug]

The World Bank International Organisation for Standardisation (ISO) Committee has approved the change of Zimbabwe's local currency code from ZWL to ZWG (Zimbabwe Gold).

The ISO 4217 standard, which aids international trade, provides clarity and reduces errors in currency designation.

Dr. Josephat Mutepfa, Deputy Director of the Financial Markets-National Payment Systems and FinTech Department at the Reserve Bank of Zimbabwe (RBZ), conveyed this in a letter dated June 25 to Fanwell Mutogo, the Chief Executive of the Bankers Association of Zimbabwe.

"The Reserve Bank of Zimbabwe advises that World Bank ISO 4217 Committee has approved our request to change the Zimbabwe Currency Code from ZWL to ZWG (Zimbabwe Gold) effective 25 June 2024. It should also be noted that the minor units of the Zimbabwe Gold shall be denominated as 'cents'," Mutepfa said.

"The Codes ZWL and ZWG will run concurrently from the 25th of June to the 31 August 2024 to allow necessary system configurations by players. In this regard, the ZWL currency code will cease to be recognised from the 1st of September 2024."
...

Loading…

bulawayo24.com

Treasury has granted authority for taxpayers to settle their obligations in Zimbabwe Gold (ZiG) and foreign currency on a 50-50 basis, while maintaining the legal provisions for economic agents to pay their taxes in the currency of trade.

The Ministry of Finance, Economic Development and Investment Promotion said it was still working on a comprehensive plan for a seamless transition from exclusive payment of taxes in the currency of trade to the domestic unit of account.
...
Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, said in a statement yesterday that if, for example, a company transacted exclusively in local currency, tax should accordingly be paid in local currency (ZiG).
...
Minister Ncube said that as part of a comprehensive review of the Framework of Tax Payments, the Treasury would in due course specify the taxes which will exclusively be payable in local currency and the necessary supportive legislation, with the approval of Parliament.

He said that the Government was pleased with the wide acceptance of the ZiG by economic agents and the general public.

The ZiG is backed by a basket of precious metals, mainly gold, and foreign currency reserves, with a combined value of about US$300 million.

Dr Mushavanhu said during the presentation of the MPS that there was US$80 million worth of ZiG in circulation in the market.

He had indicated earlier the central bank would lobby the Treasury to provide for payment of 50 percent of quarterly payment dates (QPD) taxes exclusively in ZiG, to strengthen the new currency.

Minister Ncube said that given the need to maintain the positive economic trajectory, "Treasury is stepping up to complement the Fiscal and Monetary Policy Framework aimed at further anchoring the currency, exchange rate and price stability."

Minister Ncube's latest announcement has been applauded by economists, who said it was the right policy direction as the country sought to grow market confidence in the new currency.
...

https://www.msn.com/en-xl/africa/to...0-currency-split-for-tax-payments/ar-BB1ozXyZ

Sounds like the transition is rolling along.

 

[searcher]

IMF Staff Completes 2024 Article IV Mission to Zimbabwe

In light of new policy developments, an International Monetary Fund (IMF) staff team led by Mr. Wojciech Maliszewski conducted a second mission to Harare during June 18-27, 2024, to conclude the 2024 Article IV Consultation.

www.imf.org

 

[pmbug]

The Zimbabwe Gold (ZiG) has significantly curbed inflation, achieving a zero percent month-on-month inflation rate for June 2024.

Presenting the price statistics, Mr. Aluwisio Mukavhi, the acting director-general of the Zimbabwe National Statistics Agency (ZimStat), explained that this zero percent rate indicates that prices, as measured by the all-items ZiG Consumer Price Index (CPI), remained stable between May and June 2024.
...

ZiG kills Zimbabwe's inflation

The Zimbabwe Gold (ZiG) has significantly curbed inflation, achieving a zero percent month-on-month inflation rate for June 2024. Presenting the price stat...

bulawayo24.com

Zimbabwe had lower inflation than the USA last month.