The Reserve Bank of Zimbabwe has announced the introduction of a new currency called ZiG, aimed at replacing the depreciating Zimbabwe dollar. The new currency will be backed by gold reserves and a basket of foreign currencies, and is set to be implemented on Monday. The move comes in the midst of a currency crisis that has plagued the country’s economy for years, with the Zimbabwe dollar losing over 70% of its value since January on the official market.
Inflation in Zimbabwe has been on the rise, reaching 55.3% in March, up from 26.5% in December last year. Traders have been rejecting lower denominations of the old currency, leading to a significant reliance on U.S. dollars for transactions. Reserve Bank Governor John Mushayavanhu emphasized the need to prevent the local currency from collapsing, as a majority of transactions were already being conducted in U.S. dollars. People will have three weeks to exchange their old notes for the new currency.
The announcement of the new currency marks the latest in a series of currency measures taken by the Zimbabwean government since the collapse of the Zimbabwe dollar in 2009. Following the reintroduction of a domestic note in 2016, the country experienced volatility in its currency, leading to policy changes that initially banned the use of foreign currencies like the U.S. dollar for domestic transactions in 2019. However, the ban was later lifted as the black market thrived and the local currency continued to depreciate.
The introduction of the ZiG currency is seen as a response to the sustained pressure on the Zimbabwe dollar and the rejection of lower denominations by traders. The hope is that by anchoring the new currency on gold reserves and a basket of foreign currencies, stability can be achieved in the country’s monetary system. The government is making efforts to ensure that the local currency remains viable as an alternative to the U.S. dollar in transactions, with the goal of addressing the ongoing economic challenges faced by Zimbabwe. The success of the new currency will depend on its acceptance by the population and its ability to withstand external pressures.
