Thanks to Becky Subrahmanyam and MarkZ I have learned that this statement I made in past reports is not true: “Zimbabwe has announced their gold-backed currency and their bonds must be redeemed by Tues. 30 April 2024.”
There are three kinds of Zim money: 2008-2009 Zim Bonds, Zim fiat money and the new asset-backed Zig.
MarkZ explained: “The Zim fiat money must be redeemed by Tues. 30 April 2024 for the new Zig. The time limitation has nothing to do with 2008-2009 Trillion Series Zim Bonds that we hope to exchange for USN.
The gold/asset backed currency is the new Zig currency and it does not need to be redeemed. Only the Zim fiat money needs to be redeemed by Tues. 30 April 2024.” I apologize for any misunderstanding this may have caused. …
ZiG will definitively gain in value — Reserve Bank of Zimbabwe | The Sunday Mail (4/14/24)
ZIMBABWE marked an epochal moment in its history when it introduced a new currency, Zimbabwe Gold (ZiG), on April 5, taking a giant step towards bringing a lasting solution to exchange rate volatility, which, for nearly half a decade, has driven inflation and made saving in the domestic unit difficult.
This is the third time Zimbabwe has switched currencies since scrapping the domestic unit in 2009, amid the ravages of inflation in a country that had gone through fundamental changes in its agricultural land ownership, was buckling under the weight of sanctions and was closed to sources of cheaper external funding.
In the realm of international trade, the dominance of major global currencies such as the US dollar, the euro and the yen has been undisputed for many years.
However, there is a growing recognition of the benefits associated with conducting trade using local currencies.
By bypassing the need for constant conversion into a foreign currency, trade in local units offers numerous advantages. They include enhanced economic stability, reduced dependence on foreign exchange and increased autonomy for any country.
As inflation continued to wreak havoc on Zimbabwe’s currency, the annual rate climbed to 55,3 percent from 46,7 percent in February 2024, reflecting the pass-through effects on prices, which track the movement in the exchange rate.
In light of the high inflation challenges emanating from exchange rate volatility, many observers have wondered how just the change in the national currency could turn the situation around.
But Zimbabwe’s monetary authorities expect the new currency and policy measures they are rolling out to restore confidence in the local unit and go a long way in fostering simplicity, credibility, certainty and predictability in the country’s monetary and financial system.
New Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mushayavanhu last week shared his perspectives on how ZiG and the monetary policy intervention he announced just over a week ago in the 2024 Monetary Policy Statement (MPS) will transform Zimbabwe’s financial affairs.
The country’s new currency will operate alongside several foreign units in the multi-currency regime, legislated to run until 2030, including the US dollar, the pound sterling, the euro, the South Africa rand and Botswana pula.
ZiG shall, the RBZ said, at all times be anchored and fully backed by a composite basket of reserves comprising foreign currency and precious metals (mainly gold) received by the apex bank as part of in-kind royalties and kept in its vaults.
Foreign currency balances will accumulate through market purchases from the 25 percent export surrender requirements, as well as the sale of some precious metals received as royalties.
What has changed?
Responding to questions during an interview with Zimpapers Television Network (ZTN)’s “Beyond the Dollar”, Dr Mushayavanhu said the basket of precious commodities, mainly gold, plus the foreign exchange holdings the bank has, would change the game.
“We are bringing in a new concept in the form of a new currency, which is backed by reserves. RTGS, bond notes were not backed by reserves. This is why they were behaving the way they were behaving.
“So, we decided we have to bring in a new currency, which has a new basis for exchange rate determination and I did explain in the Monetary Policy Statement that the exchange rate for the ZiG is going to be determined by the basket of commodities that is anchoring it.
“Over and above that, it is also going to be determined by the market.
“We had a situation, as I said earlier, RTGS, bond notes were not backed by anything, so we cannot link ZiG to the old currency; it’s a different currency altogether,” he said.
Dr Mushayavanhu said while the bond notes were at some point backed by a US$200 million facility from Afreximbank, the amount of local currency in circulation was exceeded, exposing the local currency to forces of depreciation.
Sudani has a very long statement out today and there are no plans of America leaving... Furthermore, I have a feeling that although Sudani has the well being of his people in mind concerning the exchange rate, O’biden has his eyes on the dinar in our treasury. It’s a win win.No horse trading needed.
Samson
Article: "Al-Sudani to American companies: The current stability in Iraq is encouraging for you to engage in development projects"
Article ”The prime minister’s visit to Washington. Activating the economic partnership is one of the sectors of the Strategic Framework Agreement"
Source: Iraqi PM's visit to Washington to prioritize economic ties over security
Shafaq News/ Marking his first visit to the United States since assuming office in October 2022, Iraqi PM Mohammed Shia Al-Sudani headed a high-level delegation in an official visit to discuss various issues of common interests.
A government source unveiled to Shafaq News Agency details of Al-Sudani's visit to Washington, which marks a diplomatic endeavor.
According to the source, the 5-day visit encompasses three states, Washington, Michigan, and Houston, "showcasing a comprehensive engagement with various sectors and stakeholders."
"Al-Sudani is scheduled to meet with key figures, including US President Joe Biden, Secretary of State Antony Blinken, and the Secretary of Defense, Lloyd Austin, at the Pentagon to delve into crucial bilateral matters." The source explained.
Additionally, Al-Sudani's itinerary includes sessions with representatives from US energy companies and engagements with the Iraqi community across the visited states "to foster deeper ties and explore avenues for collaboration beyond traditional diplomatic spheres."
Al-Sudani is accompanied by a delegation comprising government officials, parliamentarians, and business leaders. Notably, the source pointed out that the absence of a high-ranking Iraqi security official from the delegation highlighted a "strategic shift towards cooperation in other fields including economy and developmental agendas in the Iraq-US partnership."
"The visit is strategically aligned with Iraq's vision of expanding cooperation with the United States, particularly in economic domains outlined in the U.S.-Iraq Strategic Framework Agreement. Al-Sudani seeks to activate provisions across seven sectors in the Agreement."
The Strategic Framework Agreement guides overall political, economic, cultural, and security ties with Iraq.
Initiatives like the Strategic Development Road Project, which has the potential to enhance regional connectivity and foster economic prosperity, will be central to discussions, said the source, "The delegation will also engage in talks regarding strategic gas projects and the ongoing dialogue concerning the Global Coalition's mission in Iraq."
Earlier, a senior State Department official revealed that al-Sudani's upcoming visit to Washington will emphasize economic ties more than the security and defense relationship between the United States and Iraq.
Speaking on condition of anonymity during a briefing with reporters on Thursday, the official clarified that "while discussions on defense and security matters will be part of the agenda, they will not be the primary focus of Sudani's visit."
"The visit's primary focus will center on enhancing economic cooperation, with discussions extending to areas such as education, environmental initiatives, and US support for development projects in Iraq." He explained.
Notably, Iraqi-American relations have encountered numerous challenges, oscillating between periods of deterioration and improvement based on regional circumstances. Following the 2003 invasion of Iraq, justified on grounds of weapons of mass destruction, and the subsequent overthrow of Saddam Hussein's regime, American influence expanded significantly. However, the "envisioned transition to democracy" led to widespread destruction, impacting Iraq's culture, populace, and heritage.
Furthermore, the rise of ISIS further complicated matters, prompting the United States, within the Global Coalition framework, to join forces with the Iraqi army, Popular Mobilization Forces, and Peshmerga in combating the terrorist group.
Although Washington announced a withdrawal from Iraq in 2011, it maintained a presence through ongoing operations as part of the Global Coalition.
Over the past decade, most Iraqi prime ministers have made public calls for the withdrawal of US military forces from their country. Prime Minister Ibrahim al-Jaafari initiated this in 2005, followed by Nouri al-Maliki in 2008, Adel Abdul-Mahdi in 2020, and Mohammed Shia al-Sudani, the current prime minister, in December 2023. These requests have often been influenced by Iranian-backed groups in Iraq (The Coordination Framework).
The presence of foreign troops in Iraq has emerged as a significant issue, gaining prominence following the targeted killing of top Iranian general Qasem Soleimani and the leader of an Iran-backed leader, Abu Mahdi Al-Muhandis, in a US drone strike in Baghdad in January 2020, when the Iraqi parliament passed a non-binding resolution calling the government to end the presence of all foreign troops.
In December 2021, the US-led Coalition ended its combat mission in Iraq four years after helping the Iraqi forces in defeating ISIS.
Last January, a joint Higher Military Commission (HMC) between Iraq and the US-led Coalition in Baghdad was established. Three subcommittees were also formed to discuss the threat of ISIS, the operational environment, and the capabilities of the Iraqi Security Forces.
HMC is also concerned with reviewing the Coalition's mission after Iraq's victory against ISIS.
Currently, 2,500 troops are deployed to "advise, assist, and enable" Iraqi security forces at the government's request.
On the economic level, since the US invasion, the nation has suffered from a prolonged period of significant inflation. The peak occurred in 2006, with the consumer inflation rate soaring to 53 percent, as the International Monetary Fund reported.
Despite the United States' aims to foster economic stability and revitalize Iraq's oil infrastructure post-2003 invasion, persistent violence, shortages of essential commodities, dollarization, and an unstable monetary policy landscape all played roles in exacerbating inflationary pressures.
When considering Iraq economically, Americans often focus on its oil resources. However, in November 2023, ExxonMobil, the largest American oil company, withdrew from Iraq after a decade of efforts without tangible results. This exit is likely to dampen expectations for other US companies.
The potential for growth in U.S.-Iraq trade is significant. In 2022, the US exported goods worth $897 million to Iraq, with automobiles being the top product. Conversely, Iraq exported goods totaling $10.3 billion, primarily crude oil.
The American eye also focuses on the Iraqi prominent economic initiative: the $17 billion Development Road project, which involves establishing an overland road and rail connection from the Persian Gulf to Europe via Turkiye. This ambitious endeavor includes plans for free-trade zones along its route, signaling Iraq's strategic focus on expanding trade and connectivity beyond its borders.
Al-Sudani, a figure welcomed by most Iraqi parties, now confronts the challenge of balancing Iraq's international relations and interests with the influential Iraqi leaders, primarily from the Shia community, who view the Americans as their "enemy."
The more they get their sovereignty back, they're already on the Swift system, they're working their way through the World Trade Organization, it's just a matter of time before they remove all restrictions and we can start buying them [Iraqi dinars] through the banks again...
My gut feeling is they're going to re-denominate and then change the exchange rate right after that to where it should be, somewhere around $3 and something cents per dinar
. I've got 5 million. If it goes to $3 and something, I made $15,000. I'm a happy camper with that.
It's better than not having anything. I understand for a lot of you you're like, 'No. No. NO. that's not good because that's not what I had in mind.' And I'm sorry but you're asking me my opinion. That is my opinion. They will re-denominate the currency, LOP off the zeros - your 25,000 dinar will become 25 and then they'll reinstate the old rate...
