Zimbabwe has introduced a new gold-backed currency called ZiG – the name stands for “Zimbabwe Gold”.
It is the latest attempt to stabilise an economy that has lurched from crisis to crisis for the past 25 years.
The ZiG is the country’s sixth currency since independence in 1980
It is replacing its collapsing local currency with a new one backed by gold and foreign currencies that it hopes will be more stable and help bring down inflation, the central bank said on Friday.
The Southern African country relaunched its own currency in 2019 after a decade of dollarisation, but it struggled to win public trust and more than 80% of domestic transactions are now conducted in foreign currency.
A more than 70% slide in the Zimbabwean dollar since the start of the year pushed price rises beyond 55% in annual terms in March (ZWBCPY=ECI), opens new tab, evoking bitter memories of hyperinflation under former leader Robert Mugabe.
The new currency – called Zimbabwe Gold (ZiG) – will circulate alongside foreign currencies, central bank governor John Mushayavanhu told a press conference in the capital Harare.
The central bank also said it was “recalibrating” its main interest rate and setting it at 20%, without elaborating, a drastic cut from the previous rate of 130%.
In a monetary policy statement, the Reserve Bank of Zimbabwe said the new currency’s starting exchange rate would be determined by the closing interbank exchange rate on April 5 and the London PM Fix price of gold on April 4.
The bank referred to the new currency as “structured”, saying it would be “anchored by a composite basket of foreign currency and precious metals (mainly gold) held as reserves for this purpose by the Reserve Bank”.
“If we implement these measures, we expect them to have an impact on inflation,” Mushayavanhu told reporters.
Banks are to convert their current Zimbabwean dollar balances into ZiG with immediate effect, while people will have 21 days to exchange their old notes and coins for new ones, the monetary policy statement said.
However, the US dollar, which accounts for 85% of transactions, will remain legal tender and most people are likely to continue to prefer this.
The new ZiG banknotes come in denominations of between 1 and 200.
Coins will also be introduced to overcome the shortage of US coins, which has seen people receive change in sweets, small chocolates and pens.
Mr Mushayavanhu said the new currency was being rolled out with immediate effect and banks must convert current Zimbabwe dollar balances to the ZiG.
He committed to ensuring that the amount of local currency in circulation was backed by equivalent value in precious minerals – mainly gold – or foreign exchange, in order to prevent the currency losing value like its predecessors.
Zimbabweans have a historic mistrust of the central bank, dating back to 2008, when it was printing Z$10tn notes while inflation had run out of control.
It then abolished its own currency and for many years only used foreign banknotes such as the US dollar and the South African rand.
In late 2016, the body introduced a new currency called the bond note that was backed by the US dollar loan facility. The then-central bank governor John Mangudya vowed it would remain on a par with the US dollar. But the bond note crashed when the government began printing excess money.
Promises have now been made by the central bank’s new governor that overprinting will not be allowed to happen again.
Friday’s announcements are the culmination of months of deliberations between the central bank and finance ministry on currency reforms.
The central bank also said on Friday that it had $100 million in cash and 2.52 tonnes of gold worth $185 million in reserve assets.
Peoplesmind
