The Reserve Bank of Zimbabwe has introduced a new currency named Zim Gold (ZiG), aimed at curtailing the hyperinflation plaguing the nation and bringing stability to its struggling economy. John Mushayavanhu, the Governor of the Reserve Bank, announced in Harare that the ZiG will be underpinned by a mix of foreign currencies, gold, and other precious minerals. This diversified backing is expected to allow the ZiG to circulate in conjunction with a selection of international currencies.
Mushayavanhu also announced the implementation of a market-driven exchange rate system. Effective immediately, Zimbabwean banks are required to transition existing Zimbabwe dollar holdings to the ZiG, with the intent of simplifying and bringing reliability and consistency to financial transactions. The new banknotes will be available in eight denominations, ranging from one to 200 ZiG, featuring designs of gold ingots being crafted and the iconic Balancing Rocks, a motif carried over from the previous currency.
Citizens are given a three-week window to exchange their old currency for the ZiG. This move comes as a response to the dire economic conditions, characterized by a high inflation rate which stood at 55 percent in March, deep poverty, unemployment, and the effects of a severe drought.
The recent economic crisis has rekindled memories of the 2008 hyperinflation, which culminated in the issuance of a 100-trillion-dollar Zimbabwean note, now a collector’s item. Analysts remain skeptical about the adequacy of Zimbabwe’s reserves to support the new currency and its vulnerability to fluctuations in gold prices.
The central bank’s vaults, inspected by President Emmerson Mnangagwa and containing 1.1 tonnes of gold, alongside reserves held abroad and assets in cash and precious minerals, are estimated to be worth $285 million. According to Mushayavanhu, this is more than triple the backing required for the newly issued ZiG. In addition, a stringent monetary policy is set to be adopted, correlating the money supply to the reserve growth in gold and foreign currency.
