The Zimbabwe Stock Exchange (ZSE) has begun trading in the country’s new gold-backed currency.
This follows the demonetisation of the Zimbabwean dollar by the country’s Central Bank in a raft of monetary policy measures announced on April 5, 2024.
What New Changes Mean For Stock Traders
The new currency, known as Zimbabwe Gold (ZiG) has replaced the Zimbabwean dollar (ZW$).
The ZiG has denominations between 1 and 200.
The Zimbabwean Stock Exchange adjusted trading on the bourse at the exchange rate of ZiG1 to ZW$2498.7242.
According to the RBZ, the bank has reserves of USD 100 million in cash and 2, 522kgs of gold, amounting to more than three times cover for the new currency.
The government said it will make it mandatory for companies to pay at least half of their tax obligations using the new currency.
The MPC ordered banks to convert Zimbabwean dollar balances into ZiGs immediately, and gave a three-week window for ZW$ currency holders to deposit their notes and coins.
“All ZSE indices will be rebased to 100 basis points.
“The rebasing is necessary to allow the indices to accurately reflect the performance of the market in the context of the new currency ZiG,” Justin Bgoni, CEO of the ZSE, said in a statement.
Latest Monetary Policy Measure
The ZiG is Zimbabwe’s latest monetary policy measure to try to rein in runaway inflation, which has seen most people and businesses prefer to trade in foreign currencies.
The country issued a 100-trillion-dollar note in 2008, and has since switched to foreign currencies, bond notes, gold coins, and a gold-backed digital currency. In 2019, it revived the ZW$ with stringent rules, before permitting the use of foreign currencies in March 2020.
“The structured currency being introduced is anchored by a composite basket of foreign currency and precious metals (mainly gold) held as reserves for this purpose by the Reserve Bank,” Reserve Bank governor John Mushayavanhu said during the Monetary Policy Committee briefing on April 5th.
Among the changes include adopting a market-based forex market, which is replacing a controversial auction system.
The RBZ said it would seed the market with 25% surrendered export earnings, as it works to win back the public trust and build a new, stable, local currency. The country will still use a multi-currency system until 2030.
In addition to the demonetisation of the ZW$, the RBZ also slashed its central bank rate from 150% to 30%.
