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Zimbabwe ditches dollar for new gold-backed currency in bid to revive economy
The government of President Emmerson Mnangagwa has introduced a new gold-backed currency, ZiG, which will replace the existing Zimbabwe dollar and be used to carry out all business transactions in the Southern African nation.
According to Zimbabwe’s Reserve Bank governor, John Mushayavanhu, ZiG, which means Zimb Gold, will be anchored mainly on the gold and foreign currency reserves.
During the unveiling of the new currency and the presentation of the 2024 monetary policy statement on April 5, 2024, Mushayavanhu admonished all banks to convert any Zimbabwe dollar in their possession and vaults to ZiG.
“With effect from today, banks shall convert the current Zimbabwe dollar balances to ZiG,” Mushayavanhu said, adding that it “will circulate with other currencies in the basket. If we implement these measures, we expect them to have an impact on inflation.”
Despite all these measures, the U.S. dollar will remain a legal tender for transactions in Zimbabwe.
Zimbabwe’s inflation challenges predate the official hyperinflation era, which commenced in 2007. In 1998, the nation witnessed an annual inflation rate of 47%.
Apart from a brief decline in 2000, inflation consistently escalated until the hyperinflation period. Eventually, the Zimbabwean dollar was discarded in favour of several foreign currencies.
Based on World Bank data, Zimbabwe initially made progress in addressing its inflation issues. Nonetheless, the annual inflation rate experienced a resurgence.
By 2022, it stood at approximately 104%, marking a significant improvement from the 557% recorded in 2020. Additionally, the annual gross domestic product (GDP) growth rate rebounded to 8.5% in 2021, a notable increase compared to -7.8% in 2020.
However, according to a Bloomberg report in March, the Zimbabwean dollar has consistently lost value against the US dollar, depreciating on every trading day throughout this year. This decline has reached 72%, positioning it as the second-worst-performing currency globally.
Zimbabwe National Statistics Agency also reports that the nation’s annual inflation rate surged to a seven-month peak of 55.3% in March, rising from 47.6% in February.
