Zimbabwe Introduces New Currency “ZiG” Backed by Foreign Currency and Gold

Zimbabwe has embarked on a bold initiative to stabilize its currency by replacing the local dollar with a new unit named ZiG, short for Zimbabwe Gold.

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This innovative currency is backed by a combination of foreign currency and gold reserves, signaling a strategic shift in monetary policy.

Central Bank Governor John Mushayavanhu announced the launch of ZiG at a press conference in Harare, revealing that it would debut on April 8 with an introductory exchange rate of 13.56 per dollar and a fixed interest rate of 20%.

This contrasts sharply with the previous central bank rate of 130%, which was the highest in the world.

The decision to introduce ZiG marks Zimbabwe’s sixth attempt to establish a functional local currency since the devastating inflation crisis of 2008, which rendered the currency worthless.

To stimulate demand for ZiG, the government has mandated that companies settle at least 50% of their tax obligations using the new unit.

The current Zimbabwean dollar has experienced a significant decline, losing four-fifths of its value since the beginning of the year, making it the world’s second worst-performing currency.

This depreciation has led to a surge in dollarization, with over 80% of transactions conducted in foreign currencies.

The introduction of ZiG is expected to curb annual inflation to between 2% and 5% by year-end and reduce monthly inflation to below 1%.

President Emmerson Mnangagwa initially hinted at the introduction of a “structured currency” in February, with the plan delayed for further refinement.

Governor Mushayavanhu, who assumed office ahead of schedule, pledged to implement orthodox monetary policies and refrain from quasi-fiscal activities.

To restore public confidence, ZiG will be fully backed by a combination of gold, other precious metals, and foreign currency reserves held at the central bank.

Supporting documents highlight reserves totaling $285 million, including $100 million in cash and 2,522 kilograms of gold worth $185 million, providing more than three times the necessary cover for the issuance of ZiG.

This strategic move reflects Zimbabwe’s commitment to financial stability and economic revitalization.