Zimbabwe’s New Gold-Backed Currency, ZiG, to Tackle Inflation

Zimbabwe has announced plans to replace its struggling local currency with a new one, backed by gold and foreign currencies, in a bid to stabilise its economy and combat soaring inflation, the central bank revealed on Friday.

The Southern African nation had reintroduced its own currency in 2019 following a decade of dollarization. However, public confidence remained elusive, with over 80% of domestic transactions conducted in foreign currency.

A staggering decline of over 70% in the value of the Zimbabwean dollar since the year’s outset has fuelled inflation rates surpassing 55% annually as of March, evoking painful memories of hyperinflation during the era of former leader Robert Mugabe.

Incoming Reserve Bank of Zimbabwe (RBZ) governor John Mushayavanhu unveiled the new gold-backed currency, named the Zimbabwe Gold (ZiG). The ZiG, available in denominations of 1, 2, 5, 10, 20, 100, and 200, alongside half and quarter ZiG, will debut with an initial exchange rate of US$1:13.56, set to be gazetted next Monday.

Mushayavanhu, presenting the Monetary Policy Statement, announced a 21-day window for Zimbabweans to convert their existing Zimbabwean dollar holdings into ZiG. Banks have been instructed to adapt their systems accordingly to facilitate the transition.

Importantly, the multi-currency system will persist, with price adjustments linked to fluctuations in gold prices. Mushayavanhu emphasized the stability, predictability, and simplicity intended with the introduction of ZiG, which will co-circulate with other foreign currencies.

Also Read: Reserve Bank of Zimbabwe launches ZiG: Gold-Backed Digital Token to Counter Currency Instability

Furthermore, measures have been outlined to convert existing Zimbabwe dollar balances, loans, treasury bills, and other financial instruments into ZiG. Account holders are assured that their ZW$ notes and coins will be credited to their ZiG accounts based on applicable conversion rates.

Special provisions have been made for individuals without bank accounts to exchange their Zimbabwe dollar holdings at specified banks within the given timeframe.

Crucially, ZiG will be fully backed by a composite basket of reserves, predominantly consisting of foreign currency and precious metals, particularly gold. The aim is to maintain ZiG’s value and prevent the recurrence of currency devaluation experienced in the past.

This initiative marks Zimbabwe’s latest effort to stabilise its economy, which has faced recurrent crises over the past quarter-century. Despite challenges, including the recent drought devastating half of the country’s maize crop, Zimbabwe remains committed to forging a path towards economic stability and prosperity.