Zimbabwe Introduces New Gold-Backed Currency, Aims to Curb Inflation
Summary:
The Reserve Bank of Zimbabwe has rolled out a new currency, the Zimbabwe Gold (ZiG), in physical form, replacing the former Zimbabwean dollar. Backed by gold and foreign currencies, ZiG saw its first introduction as a digital payment platform in October. The shift to the new currency created turbulence in the local stock market. The country's inflation rate is expected to drop significantly due to the new, stable currency. The central bank's interest rate has also decreased markedly with the introduction of ZiG.
With its debut as a digital payment platform in October, the Reserve Bank of Zimbabwe has now rolled out the Zimbabwe Gold, or ZiG, in physical form. This new currency, which replaces the former Zimbabwean dollar, is backed by both gold and foreign currencies. As of April 29, the central bank has initiated distribution of the paper and coin form of ZiG to all financial institutions in the country, as reported by Bloomberg. The official announcement of ZiG's launch was made on April 5, setting an exchange rate of 13.56 ZiG to the American dollar. The digital trading of ZiG commenced on April 2, even though its initial introduction was in October, with a rate connected to gold prices. The shift to the new currency had significant impacts on the domestic stock market. Businesses will now have to pay at least half of their tax dues in ZiG.
The central bank has stated a new interest rate of 20% when introducing the ZiG, a decrease from a globe-topping 130%. Predictions from the newly appointed central bank governor, John Mushayavanhu, indicate that the nation's inflation rate should drop from 55% to 2% every year, attributable to the new, more stabilized currency. The present state shows that more than four-fifths of financial transactions in the country are carried out in U.S. dollars, with the Zimbabwean dollar losing nearly three quarters of its value this year alone.
The Reserve Teachers Union of Zimbabwe cites that ZiG is supported by $100 million in foreign currency reserves and 2.5 tonnes of gold, which equates to a cumulative value of $285 million. This figure triples the value of the ZiG being circulated, as stated by Mushayavanhu. During a press conference on April 5, he mentioned, “We aim for a sturdy and stable domestic currency in our country. Printing money does not resolve issues. As long as I am in charge, it will not happen.”
In 2023, Zimbabwe was ranked third in Africa for cryptocurrency utilization. The International Monetary Fund has been against the introduction of the gold-backed currency ever since the plan for ZiG was made public in April 2023.
Published At
4/30/2024 11:26:03 PM
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