Following years of economic turmoil, Zimbabwe has recently introduced a new gold-backed currency in an effort to curb inflation and stabilize its struggling economy.
The new currency, known as Zim Gold (ZiG), is backed by a combination of foreign currencies, gold, and precious minerals.
The governor of Zimbabwe’s Reserve Bank, John Mushayavanhu, announced the launch of ZiG during a press conference in Harare.
He stated that the new currency would circulate alongside a basket of other currencies and would also have a market-determined exchange rate.
Mushayavanhu emphasized that the introduction of ZiG aims to bring simplicity, certainty, and predictability to Zimbabwe’s financial system.
The new banknotes, available in denominations ranging from one to 200 ZiG, feature images of gold ingots being minted and Zimbabwe’s iconic Balancing Rocks.
Zimbabweans have been given a 21-day window to convert their old currency into the new ZiG. The Zimbabwean dollar has experienced a drastic depreciation against the US dollar, with official exchange rates showing a value of 30,000 Zimbabwean dollars to one US dollar, and even higher rates on the black market.
Zimbabwe’s economic woes have been exacerbated by the poor performance of its currency, leading to a high inflation rate of 55 percent in March.
This has put immense pressure on the country’s 16 million inhabitants, who are already grappling with poverty, unemployment, and a severe drought worsened by the El Nino weather pattern.
The situation is reminiscent of the hyperinflation crisis in 2008 when the central bank had to issue a 100-trillion-dollar note. With doubts about the new currency’s backing and concerns about volatility in gold prices, analysts are questioning the government’s ability to stabilize the economy.
President Emmerson Mnangagwa recently inspected the central bank’s gold reserves, totaling 1.1 tonnes domestically and an additional 1.5 tonnes abroad, along with cash and precious minerals.
While central bank governor Mushayavanhu reassured that the reserves exceed the currency’s value threefold, the government plans to implement a tight monetary policy tied to gold and foreign exchange reserves to restore stability.
Despite the introduction of ZiG, questions remain about whether Zimbabwe’s central bank has sufficient reserves to truly back the new currency.
The country’s history of economic instability and hyperinflation has left many skeptical about the effectiveness of this new monetary policy.
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