Zimbabwe Adopts Gold-Backed ZiG Currency

Zimbabwe has introduced a new currency, the Zimbabwe Gold, backed by gold to replace the failed local dollar amid economic turmoil.

Zimbabwe has introduced a new currency that is backed by gold and is called Zimbabwe Gold (ZiG). This currency has replaced the failed local dollar.

The administration of President Emmerson Mnangagwa initiated this action, signaling a significant shift in the nation’s monetary policy.

Launch of the Zimbabwe ZiG from Zimbabwe Dollar

Zimbabwe’s persistent economic difficulties drove the implementation of the ZiG. The Zimbabwe dollar, which was the previous currency, saw a significant devaluation and it is currently trading at Z$36,000 to the US dollar.

It has lost more than three-quarters of its value in just this year alone. As a result, John Mushayavanhu, the governor of the Reserve Bank confessed that the printing of a significant amount of money had a detrimental effect and led to the devaluation of the previous currency.

The ZiG’s main goal is to provide the national currency stability through a combination of foreign exchange, gold, and other significant mineral reserves.

Not only does the Reserve Bank of Zimbabwe have around one ton of gold stored in its vaults, but it also has 1.5 tons of gold stored overseas. The country’s financial system has consistently established trust and trustworthiness through the decision to back the new currency with actual assets.

On the other hand, even though certain steps have been taken to move away from the Zimbabwe dollar, both experts and residents remain suspicious.

The significance that the gold backing plays in guaranteeing the new money is questionable because it has a low level of foreign exchange reserves and the country has a long history of monetary instability.

For many of the citizens who have witnessed the decline in their purchasing power and savings, the term “mattress banking” has become popular.

These individuals now choose to save money at home rather than in banks because they believe it will provide them with greater security. Like the other African countries, Zimbabwe’s foreign exchange reserves are significantly lower than those of the other countries.

In comparison, the country reserves are only enough to pay a month’s worth of imports, whereas Kenya’s reserves amount to nearly $7 billion, which is sufficient to fund imports for 3.7 months.

The fact that this gap exists is evidence of the challenges that the nation faces in achieving stability with its newly introduced currency.

President Mnangagwa’s efforts to facilitate Zimbabwe’s reintegration into international markets and restore support from multi-lateral lenders have failed due to unresolved debt and political issues in the country.

Nevertheless, the United States of America and other governments have demonstrated reluctance to engage with Zimbabwe, particularly in light of allegations that the administration of Mnangagwa has engaged in the manipulation of elections and the violation of human rights.

We will issue a band of other currencies alongside the ZiG, available in eight different denominations. These denominations will bear representations of gold bars and the well-known Balancing Rocks.

The citizens are provided with a period of 21 days during which they can convert their previous money into the new Zimbabwean dollar. The government must work toward restoring economic stability in the country, as the rapid change in these developments underscores the necessity of doing so.

There is a period of hyperinflation and economic distress that the people of Zimbabwe are experiencing at the same time that the ZiG is coming into being.

As a result of the devaluation of the Zimbabwean dollar and the hyperinflation that has occurred over the past few years, issues such as poverty, unemployment and severe drought have become significantly worse.

Therefore, the implementation of the ZiG is considered an essential intervention to address these issues. However, some have questioned whether Zimbabwe’s reserves are sufficient to support the new currency.

This is especially true when taking into consideration the volatility of gold prices. As a result, the central bank has detailed its reserves, which consist of gold and precious minerals, to offer a threefold cover for the issuing of the ZiG.

Furthermore, a stringent monetary policy is under consideration, intending to connect the expansion of the money supply to the expansion of gold and foreign exchange reserves.