Transparency Takes Center Stage: Annual Audits on Reserves Backing New Gold-Backed Currency
In a bid to bolster confidence in Zimbabwe’s new currency, Zimbabwe Gold (ZiG), the Reserve Bank of Zimbabwe (RBZ) has announced that independent external auditors will annually audit the precious minerals and foreign currency reserves backing the currency.
This move comes amidst concerns that the issuance of currency might surpass the available resources or that promised reserves might not be maintained. However, the RBZ has assured the public that stringent measures are in place to safeguard the stability and success of the new currency in addressing the country’s economic challenges.
RBZ Governor Dr. John Mushayavanhu introduced ZiG during the presentation of the 2024 monetary policy statement, emphasizing its role in replacing the inflation-ridden Zimbabwe dollar. The legal framework for ZiG, outlined in Statutory Instrument 60 of 2024, was also gazetted to facilitate its implementation.
ZiG notes and coins will be distributed through regular banking channels, with denominations ranging from 1ZiG to 200ZiG. While gold coins and Gold Backed Digital Tokens (GBDTs) will serve as investment instruments, ZiG itself will be backed by a basket of precious commodities, primarily gold and foreign exchange reserves.
Dr. Mushayavanhu highlighted that the current gold and cash reserves held by the bank exceed three times the cover required for the new currency issuance. These reserves include US$100 million in cash and 2,522 kg of gold, amounting to US$185 million, against a local currency reserve of $2.6 trillion, necessitating full (100 percent) cover of gold and cash reserves totaling US$90 million.
The RBZ clarified that ZiG will always be fully backed by a composite basket of reserves, including foreign currency and precious metals, received by the bank. Mineral reserves, collected as in-kind royalties, and foreign currency balances accumulated through market purchases and sales of precious metals will contribute to this backing.
ZiG will operate as legal tender in Zimbabwe alongside other prescribed currencies under a multi-currency system, facilitating various financial transactions and obligations. To ensure transparency and accountability, the RBZ emphasized its commitment to strict adherence to statutory limits on bank lending to the government and the maintenance of prudent monetary and fiscal policies.
In response to inquiries regarding the maintenance of reserves backing the currency, the RBZ reiterated that independent external auditors will conduct annual audits, with the results made public to uphold transparency and confidence in Zimbabwe’s financial system. Additionally, the RBZ asserted its operational and instrument independence through its board of directors and Monetary Policy Committee, safeguarded by provisions outlined in the RBZ Act.
