HomeNewsCBDCZimbabwe Introduces New Gold-Backed Currency ZiG

Zimbabwe Introduces New Gold-Backed Currency ZiG

Date: 05 April, 2024

To stabilize its volatile economy, Zimbabwe has launched a new gold-backed currency known as ZiG, short for “Zimbabwe Gold.” This move comes after years of economic turmoil in the country.

The announcement was made by central bank governor John Mushayavanhu during the unveiling of the new notes. Mushayavanhu stated that ZiG would be structured and its exchange rate would be determined by the market.

The introduction of ZiG replaces the Zimbabwean dollar, RTGS, which had experienced a significant loss in value this year, losing three-quarters of its value. March recorded an annual inflation rate of 55%, marking a seven-month high.

Zimbabweans are given a 21-day window to exchange their old, inflation-affected notes for the new ZiG currency. However, the US dollar, constituting 85% of transactions, will continue to be legal tender and preferred by most people.

The new ZiG banknotes are available in denominations ranging from 1 to 200. Additionally, coins will be introduced to address the scarcity of US coins, which has led to receiving changes in items like sweets, small chocolates, and pens.

Mushayavanhu emphasized that the new currency is immediately effective, with banks required to convert existing Zimbabwe dollar balances to ZiG. He assured that the currency’s value would be backed by precious minerals, primarily gold, or foreign exchange to prevent devaluation.

Zimbabwe’s history of mistrust towards the central bank stems from the 2008 hyperinflation period when Z$10 trillion notes were printed. Subsequently, the country abandoned its currency and relied on foreign banknotes like the US dollar and South African rand.

In late 2016, the bond note was introduced, backed by a US dollar loan facility. However, it devalued due to excessive money printing by the government.

The new central bank governor has pledged to avoid overprinting, but public reception to the currency announcement has been cautious. Economist Godfrey Kanyenze highlighted the need for authorities to demonstrate fiscal discipline to rebuild trust in the market.

Key points:

  • Zimbabwe introduced a new gold-backed currency called ZiG.
  • Central bank governor John Mushayavanhu announces ZiG’s launch.
  • ZiG replaces the depreciated Zimbabwean dollar, RTGS.
  • Annual inflation in March hits 55%, a seven-month high.
  • ZiG banknotes range from 1 to 200 denominations.
  • The US dollar remains legal tender, preferred in transactions.
  • Coins to address the scarcity of US coins introduced.
  • Banks are mandated to convert Zimbabwe dollar balances to ZiG.
  • The currency’s value is backed by gold or foreign exchange to prevent devaluation.
  • Historic mistrust towards the central bank dates back to the 2008 hyperinflation.
  • New governor vows to prevent overprinting, and restore market trust.
References:

https://www.bbc.com/news/world-africa-68736155

https://www.reuters.com/markets/currencies/zimbabwes-new-zig-currency-starts-trading-credibility-doubts-linger-2024-04-08/

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