Explore the introduction of Zimbabwe Gold (ZiG), a new currency backed by gold and foreign reserves, by the Reserve Bank of Zimbabwe. Learn about the transition from the Zimbabwean dollar to ZiG, its impact on the local economy, and the government's efforts to stabilize the currency amidst years of economic instability.
The Reserve Bank of Zimbabwe has unveiled Zimbabwe Gold (ZiG), a new currency backed by a basket of gold and foreign currencies, as part of its efforts to address the country's longstanding economic challenges.
The introduction of ZiG marks a significant shift from the Zimbabwean dollar, which has struggled with hyperinflation and instability for years. ZiG debuted as a digital payment method in October before being released in paper and coin form on April 29.
The central bank distributed the physical currency to all of the country's lenders by the end of April 29, setting an exchange rate of 13.56 ZiG to the U.S. dollar. Digital trading in ZiG began earlier in April, initially tied to the price of gold.
While the transition to the new currency initially caused disruptions in the local stock market, the government aims to stabilize the economy with ZiG. Businesses will be required to pay at least 50% of their taxes in ZiG, encouraging its adoption and circulation.
With the introduction of ZiG, the central bank set its interest rate at 20%, a significant decrease from its previous rate of 130%. Central bank governor John Mushayavanhu, who assumed office in March, expressed confidence that ZiG would help reduce inflation from 55% to 2% annually.
Currently, the majority of transactions in Zimbabwe are conducted using U.S. dollars, highlighting the need for a more stable national currency. ZiG is backed by 2.5 tons of gold and $100 million in foreign currency reserves, totaling $285 million and providing a solid foundation for the new currency.
Despite concerns raised by the International Monetary Fund (IMF) about the introduction of a gold-backed currency, the Zimbabwean government remains committed to its implementation. The launch of ZiG represents a significant step towards economic stability and financial independence for Zimbabwe.
(DEREK ANDERSEN, COINTELEGRAPH, 2024)