ZiG to the Rescue: Zimbabwe Shifts Gear with New Currency Backed by Gold

Zimbabwe has announced the launch of a new currency called ZiG, backed by a combination of gold and foreign reserves.

This decision represents a significant shift in the nation’s economic strategy as it strives to stabilize its financial landscape.

The announcement came during a press conference held by Central Bank Governor John Mushayavanhu in the capital city of Harare.

Explaining the necessity of establishing a solid and stable national currency, Mushayavanhu said, “We want a solid and stable national currency in this country. It does not help to print money. Certainly under my watch it is not going to happen.”

Zimbabwe’s economy has been plagued by hyperinflation and currency instability for years. The previous Zimbabwean dollar had lost four-fifths of its value on the official market since the beginning of the year, earning it the title of the world’s second worst-performing currency.

This depreciation has led to widespread dollarization with over 80% of transactions being conducted in foreign currencies.

The introduction of ZiG represents Zimbabwe’s sixth attempt to establish a functional local currency since the catastrophic hyperinflation crisis of 2008, when inflation soared to unfathomable levels, rendering the currency practically worthless.

To foster demand for the new currency, Zimbabwean authorities have mandated that companies settle at least 50% of their tax obligations using ZiG.

This move aims to encourage the adoption of the currency in commercial transactions and stimulate its circulation within the economy.

Mushayavanhu said  ZiG will be fully backed by a combination of gold and other precious metals as well as foreign currency reserves held by the central bank.

This commitment to tangible assets is intended to rebuild public confidence in the national currency and provide a safeguard against future economic instability.

According to the central bank’s statement, Zimbabwe’s reserves currently include $100 million in cash and 2,522 kilograms of gold valued at $185 million.

This reserve holding provides a strong foundation for the ZiG currency, with reserves exceeding three times the currency being issued.

The introduction of ZiG comes after President Emmerson Mnangagwa’s government hinted at the implementation of a “structured currency” earlier this year.

Despite initial delays, the unveiling of ZiG demonstrates a renewed commitment to reforming Zimbabwe’s monetary policies and restoring economic stability.

As Zimbabwe prepares to launch ZiG on April 8th at an introductory rate of 13.56 per dollar, hopes are high for a resurgence in economic confidence and a reversal of the country’s prolonged currency struggles.