The deputy Minister of Finance and Economic Development David Mnangagwa says Zimbabweans should not worry that some traders are rejecting the ZWL50 bank note as they can find alternative ways to get around the problem.
Responding to questions in parliament yesterday, Mnangagwa said the local currency that is being rejected can actually be used to purchase the Zimbabwe Investment Gold (ZIG) which is valued at gold stored at the Reserve Bank of Zimbabwe (RBZ).
He adds that they have plans with regards to the country’s currency pointing out that everything is in place. “We have considered all the reports that are coming from all the stakeholders.
“The money will still be in use and people must not panic,” he said.
Zimbabwe introduced the ZiG Gold-Backed Digital Currency for Use as a ‘Means of Payment for Domestic Transactions recently.
The gold-backed digital tokens, is held in either e-gold wallets or e-gold cards, will be tradable and capable of facilitating person-to-person (P2P) and person-to- business (P2B) transactions and settlements.
Individuals possessing physical gold coins have the option to exchange or convert them into gold-backed digital tokens through the banking system.
Apparently, below is Mnangagwa’s verbatim in response to questions forwarded to him in parliament yesterday:
HON ZEMURA: My question is directed to the Minister of Finance or in his absence, the Leader of Government Business. We have a lot of bank notes in the form of the $50 bond notes which suddenly we were told were no longer in use.
Is there no way of announcing and making people aware in advance? Some of the people run small markets that they find it difficult to accept these notes.
THE DEPUTY MINISTER OF FINANCE AND INVESTMENT PROMOTION (HON. K. MNANGAGWA): Given the technical nature of the subject, allow me to answer in English – [HON. MEMBERS: Inaudible interjections.] –
THE HON. SPEAKER: Hon. Minister, you can try and if you think you are in trouble, go to the technical language.
*HON. K. MNANGAGWA: At the moment, the law says we use the multi-currency system and it runs up to 2023 when it shall be reviewed. However, the business community is found in trouble because the banks are not settled, they cannot lend money that goes beyond 2025 since they are not sure which currency will be used then.
What I want to assure the nation is that as a nation, we are looking into that but the Zimbabwean currency is here to stay and 2025 was suggested by industry and stakeholders.
They required Government to specify when the multi-currency regime would come to an end. We decided to benchmark it on the NDS1 and that deadline is approaching, industry and its stakeholders have approached us to clarify on that position.
The Ministry of Finance is saying we can leave it open but how best can we address that request.
On another note, we also have ZIG which is another way of restoring value. It is an alternative.
The local currency that is being rejected can actually be used to purchase the ZIG which is valued at gold stored at the RBZ. We thought our plans with regards to our currency as a country, everything is in place. We have considered all the reports that are coming from all the stakeholders. The money will still be in use and people must not panic. I thank you.
*HON. NYABANI: My supplementary question to the Minister is that many people, especially in rural areas, cannot afford to purchase ZIG. Most of the people only have local currency and are in the rural areas, what are they going to do? ZIG can only be afforded by people with a lot of money, what is going to happen to people who are rejecting the local currency?
*HON. K. MNANGAGWA: Hon. Member, one ZIG is valued at $0,06c. If you look at how the ZIG is pegged, it is one milligram of gold, which means the ZIG has been made in such a way that it is affordable to everyone. This arrangement will be clarified to people when the banks open such accounts but the people who reject our local currency, as Hon. Members, let us make those reports to the Financial Intelligence Unit.
If you are not aware of them, come to the Ministry because we want to know who is not accepting the local currency so that we may investigate. We continue to use the multi-currency regime and no one should reject the local currency.
*HON. NYABANI: We want to know, for example, for people in Nyanhewe in Rushinga, where can they access the ZIG?
*HON. K. MNANGAGWA: Thank you Mr. Speaker. ZIG is electronic money, which means that when you have RTGs or USD in your bank account, the banks will come up with a system where one can easily change or transfer your money from RTGs or Nostro and be able to buy ZIG just like how we use Inn Bucks or Ecocash.
That is how we want ZIG to operate. At the moment, ZIG has not spread in the country and is operating on the equivalence of the available gold at the RBZ. The more gold reserves increase the more ZIG increases.
HON. MUKUHLANI: Thank you Mr. Speaker Sir. My follow up question to the Deputy Minister is in relation to the comments that he made that the ZIG is backed by gold reserves. My question is why are we not backing the Zimbabwean dollar with gold reserves?
THE HON. SPEAKER: Hon. Member, can you please repeat your question?
HON. MUKUHLANI: The question is why, if ZIG is backed by our gold reserves, why are we not backing our Zimbabwean dollars as well to induce trust in the Zimbabwean Dollar?
HON. K. MNANGAGWA: Thank you Hon. Speaker. I had mentioned earlier on that it is a bit technical, but ZIG is not a currency, it is store valued; similar to the way we had our gold coins, we have tokenized these gold coins into a digital token.
THE HON. SPEAKER: Hon. Minister, address the Chair please.
HON. K. MNANGAGWA: My apologies Hon. Speaker. The ZIG is a tokenized coin which should be differentiated from our currency. As Zimbabwe, we only have one currency and it is the Zimbabwean dollar. What ZIG is then becomes a store value similar to what we have with the gold coins, which means that the ZIG does not earn interest at the same time similar with the gold coins. It provides an avenue for both the Central Bank and our agencies to mop up liquidity, but for our agencies as well to find a store value. So, in that regard, we cannot to answer the Hon. Member’s question, it is because we are talking about two different instruments. I do not know if I have been clear in my response to the Hon. Member.
THE HON. SPEAKER: I should have announced this at the beginning, please help us by identifying yourself because most Members are new, so that it is easier for the Hon. Ministers and myself.
*HON. BUTAU: Thank you Mr. Speaker Sir. My question is directed to the Hon. Deputy Minister of Finance. The gold coins did not publicly circulate, especially in the rural constituency that we represent. This ZIG we are discussing here, how do we access it? People in the rural constituency, some of them do not have bank accounts and have never seen the coins. Some do not even know they exist. So, how are the rural electorate going to benefit from these gold coins? Most of the shops in the rural areas are the ones that are rejecting the local currency in favour of the foreign currency. I thank you Hon. Speaker.
- HON. K. MNANGAGWA: Those who refuse to accept local currency are against the law. On the ZIG, the people in rural areas, I can say, I am here in Harare and I have never accessed gold coins in the banks, but those who wanted it have accessed it.
These measures that we put in place are meant for some people who may want to transact in huge local currency and are not sure of the value or the consistency of the use of that money, which is why they were given that as an option.
So, the ZIG is an alternative, instead of taking your gold to your house, you will now keep it in the bank and you access it through your phone and your card. That is where we want to get to use the gold that we mine in this country. As we increase our gold reserves, it will also be increased.
Once the banks work on the platforms, US dollar codes will be accessible even in the rural areas. They will be able to go and get the cards from their banks. We will be working in collaboration with the Reserve Bank, Government and Commercial banks. I thank you.
