Zimbabwe’s central bank has introduced a new type of money, called “Zim Gold” (ZiG), which is supported by gold, foreign currencies, and other valuable minerals, aiming to address the issue of very high inflation and to stabilize the country’s struggling economy.
John Mushayavanhu, the head of the Reserve Bank of Zimbabwe, announced in the capital, Harare, that “With effect from today banks shall convert the current Zimbabwe dollar balances into the new currency.” He also noted that the exchange rate for the new currency would be determined by the market.
The purpose behind the launch of ZiG is to bring “simplicity, certainty, [and] predictability” to Zimbabwe’s financial activities, as Mushayavanhu described. He unveiled new banknotes in eight denominations, ranging from one to 200 ZiG, which feature images of gold bars being produced and the iconic Balancing Rocks of Zimbabwe.
Zimbabweans are given a 21-day period to exchange their old money for the new currency. The introduction of ZiG comes at a time when the Zimbabwe dollar has nearly lost all its value against the US dollar, contributing significantly to the country’s high inflation rate.
Recalling the hyperinflation of 2008, when the central bank issued a 100-trillion-dollar note, now a collectible, the current inflation and economic challenges raise concerns among analysts regarding Zimbabwe’s capacity to back the new currency adequately with its gold reserves amid fluctuating gold prices.
President Emmerson Mnangagwa inspected the central bank’s gold reserves, which Mushayavanhu claimed include 1.1 tonnes of solid gold in the vaults and additional assets overseas, including diamonds equivalent to another 0.4 tonnes of gold, totaling a value of $285 million. According to Mushayavanhu, this is “more than three times cover for the ZiG currency being issued.”
Furthermore, the central bank has committed to a stringent monetary policy, linking the growth of money supply to the increase in gold and foreign exchange reserves, in an effort to support the new ZiG currency and stabilize the economy.
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