Govt re-denominates IDBZ shares

HARARE - Government has approved the re-denomination of the Infrastructure Development Bank of Zimbabwe (IDBZ)’s shares to United States dollars from the defunct local currency.

In 2009, the country abandoned its worthless Zimbabwe dollar (Z$) — ravaged by hyperinflation reaching 231 million percent — and adopted a multi-currency system, dominated by the greenback and South African Rand.

In a government gazette published last Friday, Finance minister Patrick Chinamasa said the bank’s authorised share capital, comprising 15 million ordinary shares of Z$1 000, was to be re-denominated to a nominal value of $0,01.

He also approved IDBZ’s issued share capital comprising 2 128 033 ordinary shares of Z$1 000 each to be re-denominated to 2 128 033 ordinary shares of $0,01 each.

“An amount of $21 280 33 be, and is hereby, transferred from non-distributable reserves to cover the nominal value of the issued share capital,” Chinamasa said.

IDBZ, a government institution, is mandated to focus on long-term infrastructure finance and development.

This comes after most companies operating in the country — both private and public — were forced by the Registrar of Companies in 2010 to re-denominate their share capital to United States dollars.

The ability of Zimbabwe Statistical Agency (Zimstat) to compute inflation figures had suffered irretrievably as the economic crisis intensified in 2008, forcing government to stop releasing inflation data in June 2008.

This also resulted in limitations in the ability of private companies to present reliable financial statements to shareholders, while the local currency share capital became unrealistically insignificant, especially after several Zimbabwe dollar currency revaluations that resulted in the lopping off of several zeroes from the currency.

Market watchers recently warned Zimbabwe against re-adopting the local currency arguing that the country needed a monetary regime that provided an appropriate and credible nominal anchor and reduced the risk of destabilising speculative attacks.

These requirements, the experts said, are particularly important for the country, which has monetary and fiscal institutions with low credibility due to a long history of poor governance, weak macroeconomic management, and a recent episode of unprecedented hyperinflation.

In his 2014 National Budget statement Chinamasa re-affirmed Zimbabwe’s use of the multiple-currency system until the foreseeable future.

“Government has continued to reassure the market that the multi-currency regime is here to stay.

“This is against a background of speculation and reports to the contrary, which are clearly unfounded, and can only be motivated by intentions to undermine confidence in our economy,” he said.

“This position, I must add, is anchored in our Zim Asset blueprint, and as a matter of fact, depending on size or volume of trade flows, I would be persuaded to introduce other foreign currencies to the cocktail of multi-currency regime currencies, if conditions warrant.

“Hence, consistent with pronouncements in Zim Asset, let me categorically re-state that the economy will continue using the multiple currency regime,” added Chinamasa.

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