Zimbabwe Launches New Gold-Backed Currency – ZiG
Zimbabwe has taken a significant step in its economic reform by introducing a new gold-backed currency called ZiG, which stands for ‘Zimbabwe Gold’. This move comes as the country seeks to stabilize an economy that has been plagued by crises for the past 25 years.
The new currency, ZiG, is aimed at addressing the challenges posed by the previous Zimbabwean dollar, the RTGS, which had experienced a drastic depreciation, losing three-quarters of its value this year. In a bid to combat the escalating inflation, which reached 55% in March, the introduction of ZiG is seen as a crucial measure to restore stability.
The central bank governor, John Mushayavanhu, announced that the new banknotes would be available in denominations ranging from 1 to 200. Additionally, the ZiG will be set at a market-determined exchange rate, offering a structured approach to currency management.
While the new currency is set to replace the RTGS, the US dollar will continue to be recognized as legal tender, accounting for 85% of transactions in the country. Despite the introduction of ZiG, the preference for the US dollar is expected to persist among the populace.
One of the notable features of the new currency is the introduction of coins to address the shortage of US coins, which has led to unconventional forms of change, such as sweets, small chocolates, and pens. The coins are anticipated to alleviate this issue and provide a more conventional means of exchange.
Central bank governor John Mushayavanhu emphasized that the new currency would be backed by precious minerals, predominantly gold, and foreign exchange to ensure its stability and prevent devaluation. This approach is a response to the historical mistrust of the central bank, stemming from previous currency crises and hyperinflation.
Previous attempts to address currency challenges, such as the introduction of the bond note, faced setbacks when overprinting and excessive money supply led to its devaluation. However, the current central bank governor has assured the public that measures will be in place to prevent a recurrence of such issues.
Despite the introduction of the new currency, economist Godfrey Kanyenze expressed concerns about the need for fiscal discipline and a change in the political culture to ensure the success of the reform. The announcement of the new currency coincides with the country’s struggle with a severe drought, further compounding the challenges faced by Zimbabwe.
As Zimbabwe embarks on this significant monetary reform, the successful implementation and management of the new currency will be closely monitored, with the hope of stabilizing the economy and restoring confidence in the financial system.
