On Friday the 5th of April 2024, the President of Zimbabwe through Statutory Instrument 60 of 2024 Presidential Powers (Temporary Measures) (Zimbabwe Gold Notes and Coins) Regulations 2024, passed into law a new currency law. The new currency introduced is to be known as the ZiG; it replaces the Zimbabwean Dollar. In terms of section 2 (3) of the Regulations, the new currency is backed by a composite basket of foreign currency reserves and precious metals as well as valuable minerals held by the Reserve Bank of Zimbabwe.
ZiG to be unit of account for transactions previously denominated in Zimbabwe dollars
7. For the purposes of section 44D of the principal Act as inserted by these regulations, the Minister shall be deemed to have prescribed that, with effect from the date of promulgation of these regulations (the “effective date”), for accounting and other purposes (including the discharge of financial or contractual obligations), all assets and liabilities that were, immediately before the effective date, valued and expressed in Zimbabwe dollars, shall be deemed to be values in ZiG at rate as converted in terms of section 6(1).
VALUE OF THE ZiG ON DATE OF ISSUANCE
Section 2 (5) of Regulations states that on the date of issuance of the ZiG by the Reserve Bank, the value of one ZiG shall be the value of one milligram of gold of ninety nine per centum purity as determined by the spot price of gold and the prevailing interbank foreign exchange rate. Thereafter it shall be determined by the inflation differential between ZiG and the United States Dollars inflation rates and the movement in the price market of the precious metals (mainly gold) and valuable minerals in the reserves held by the Reserve Bank of Zimbabwe.
CONVERSION OF ZWL$ TO ZiG
The Regulations in section 6 provides for the conversion of existing ZWL$ balances into ZiG balances. It states that on the day of issuance of ZiG all Zimbabwean Dollar balances held in any account by a bank shall be converted to ZiG balances by dividing the Zimbabwean dollar balance with the ZiG rate on the day. This formular for conversion is stipulated at section 2 (7).
The Zimbabwean Dollars in circulation from the date of promulgation of the regulations shall be convertible to ZiG within 21 days (swap window) from that date at the bank using the rate contained in the Regulations. After the 21 days, the Zimbabwean Dolars will not be swapped at the bank (section 6 (2).
Presidential Powers ( Temporary Measures)
What is important to highlight is that the new currency laws have been promulgated in terms of the Presidential Powers ( Temporary Measures ) Act Chapter 10:20. This law empowers the President to make regulations dealing with situations that have arisen and require urgent attention. The justification for urgency in these new regulations is set out in the preamble as shown below;
AND WHEREAS such a situation has arisen in connection with the need to stabilise prices and the exchange rate by the introduction of a domestic currency backed by foreign exchange reserves, precious metals and valuable minerals;
These regulations as they have been issued in terms of section 2 of the Presidential Powers (Temporary Measures) ordinary lapse within 180 days, unless they are repealed;
6 Expiry of regulations
(1) Unless they are earlier repealed, regulations made in terms of section two shall expire and cease to have any effect immediately before the one hundred and eighty-first day following the date of commencement of the regulations.
Multi-currency Regime to continue to operate in Zimbabwe
It is important to note that the new currency law only relates to a change in the local currency. It has no effect on the multi-currency laws presently operating in Zimbabwe.In terms of section 6 of Statutory Instrument 85 of 2020[1] (payment of goods and services using free funds), any person can use free funds for the purchase of goods and services in Zimbabwe. Foreign currency means the British pound, the United States dollar, the South African rand, the Euro, the Chinese Yuan, Indian Rupee, Japanese Yen, the Botswana pula, or any other foreign currency declared to be such by the exchange control authority[2].It must be highlighted that it remains that goods and services must be chargeable in local currency and payment may be made in foreign currency using an official exchange rate on the date of payment.
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