Zimbabwe introduces a new gold-backed currency ZiG

Utkarsh Classes Last Updated 09-04-2024

Zimbabwe introduces a new gold-backed currency ZiG

Place in News 5 min read

In April 2024, Zimbabwe issued a new gold-backed currency called ZiG. Its name ZiG means "Zimbabwe Gold". This effort of Zimbabwe is to stabilize the economy which has been continuously moving towards crisis for the last 25 years.

The announcement of the new currency in Zimbabwe comes as the country grapples with the effects of severe drought. The drought has destroyed half the crop of maize, the country's staple food.

The exchange rate of ZiG will be determined based on the market:

Central bank governor John Mushayavanhu unveils new notes, stating ZiG will be pegged to market-determined exchange rates.

The value of the Zimbabwe dollar has fallen sharply:

The ZiG will replace the Zimbabwean dollar, which has lost three-quarters of its value so far this year.
March 2024 sees annual inflation spike to 55%, a seven-month peak.

21 days time to convert to new currency:

Zimbabweans given 21 days to swap old notes for new currency amidst inflation. Within this period, Zimbabweans can exchange their old notes for the new currency.

US dollar to remain legal tender in Zimbabwe:

In Zimbabwe, the US dollar, constituting 85% of transactions, remains legal tender and preferred by most.
The new ZiG banknotes are available in denominations ranging from 1 to 200. Coins will also be introduced to address the shortage of American coins.

New currency ZiG comes into effect with immediate effect:

According to Zimbabwe's central bank governor John Mushayavanhu, the new currency is being implemented with immediate effect. Banks must convert current Zimbabwean dollar balances into ZiG.
The governor of the central bank made a commitment to ensure that the amount of local currency in circulation was backed by an equivalent value of gold or foreign currency. So that the currency can be prevented from losing value like its predecessors.

Zimbabweans distrust the central bank:

Zimbabweans have a historic distrust of the central bank. It had been printing Z$10tn of notes since 2008 while inflation was out of control.
Zimbabwe then abolished its own currency and for many years used only foreign banknotes such as the US dollar and the South African rand.

Bond note salt new currency was issued in 2016:

In late 2016, the government introduced a new currency called a bond note, backed by a US dollar credit facility. The former central bank governor, John Mangudya, had pledged that the new currency would maintain parity with the US dollar. But when the government started printing extra money the bond notes crashed.
Now promises have been made by the new governor of the central bank that overprinting will not be allowed to happen again.
But public reaction to the latest currency revelations on April 5, 2024 has been slow.