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Zimbabwe’s central bank has introduced a new gold-backed currency called ZiG – the name stands for “Zimbabwe Gold”. This comes as it seeks to tackle sky-high inflation and stabilise the country’s long-floundering economy. With immediate effect banks shall convert the current Zimbabwe dollar balances into the new currency, stated Reserve Bank governor John Mushayavanhu as he presented a monetary policy statement. The move is expected to ”foster simplicity, certainty, predictability in our financial affairs.
The new currency comes as Zimbabwe seeks to tackle sky-high inflation and stabilise its struggling economy. It is the latest attempt to stabilise an economy that has lurched from crisis to crisis for the past 25 years. ZiG would be structured, and set at a market-determined exchange rate. The ZiG replaces the Zimbabwean dollar, the RTGS, which had lost three-quarters of its value so far this year. The amount of local currency in circulation was backed by equivalent value in precious minerals – mainly gold – or foreign exchange, to prevent the currency from losing value like its predecessors.
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
Zimbabweans have 21 days to exchange old, inflation-hit notes for the new currency. 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. The new currency was being rolled out with immediate effect and banks must convert current Zimbabwe dollar balances to the ZiG.
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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 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 backed by the US dollar loan facility. The then-central bank governor John Mangudya vowed it would remain on 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.
