Business and Technology

How ZiG introduction averted a systems crash

The introduction of the Zimbabwe Gold (ZiG) currency averted a crash of accounting systems due to the buildup of zeroes as a result of the weakening Zimbabwe dollar and rising inflation, a business executive said this week.

When Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu launched ZiG on 05 April 2024, the inflation-hit Zimbabwe dollar had fallen to around $33 000 against US$1 on the interbank market and was trading above $40 000 to US$1 on the parallel market.

Speaking at a post-monetary policy statement breakfast meeting organised by Alpha Media Holdings in Bulawayo, Busisa Moyo, chief executive officer at United Refineries, said that zeros were building up on Zimbabwe’s currency and systems were struggling to cope.

Moyo, who is also chairman of the Zimbabwe International Trade Fair (ZITF) board, was one of the key business leaders consulted by Mushayavanhu before he came up with his first monetary policy statement (MPS) which introduced ZiG.

As reported by the Independent, Moyo told the meeting that experts who gathered to map out the MPS had several options to consider. He said:

We could have removed zeros like what Zambia did. When we were looking at various options, we really had a few choices. We could have stayed where we were with the ZWL (Zimbabwe dollar), but that was a headache for accountants and for people looking at financial information from outside. A load of cooking oil was now going for ZW$1,5 billion.

That would have been the second time in over a decade that systems crashed due to a buildup of zeroes on Zimbabwe’s currency.

At the peak of Zimbabwe’s financial crisis in 2007/08, up to 25 zeroes were slashed off the currency at various stages, as hyperinflation ravaged the currency which was later decommissioned in 2009.

Speaking at the same event, Mushayavanhu said the central bank will not print money to fund quasi-fiscal operations. He said:

In the past, the Reserve Bank used to do what we call quasi-fiscal operations (QFOs). There is nothing wrong with that, but let me explain the history of QFOs.

When the country was placed under sanctions, the government in its own right could not borrow because no lender was willing to lend and added to that there were arrears that were at the IMF, World Bank, and so forth.

So, the central bank had to step in and was now borrowing on behalf of the government.

We have said that is the past and we have said going forward, Treasury is going to do its own thing and the central bank is going to do what it is mandated to do by the Reserve Bank Act.

The other issue that has been raised is that the central bank is a piggybank for government.

They come and take the money when they want, and they will order us to give them the money and we will say nothing, but nothing can be further from the truth.

I think I have been on record to say when I went into the central bank I was also of the same impression.

I went there and asked for them to show me the overdraft of Treasury over the past month, past year, and the past two years.

There was nothing. Treasury has not borrowed from the central bank at all.

In the Reserve Bank Act, there is a provision that if Treasury were to borrow from the central bank, they borrow it according to a formula, but we are not necessarily going to apply that formula.

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