URGENT ANNOUNCEMENT: Zimbabwe's Central Bank Unveiled a NEW "Structured Currency" Backed by Gold
On Friday, April 5, 2024, Zimbabwe's central bank unveiled a new "structured currency" backed by gold to combat sky-high inflation and stabilize the economy.
According to Reserve Bank governor John Mushayavanhu, the ZiG will replace the Zimbabwean dollar, which has fallen in value over the past year, pushing inflation through the roof.
"As of today, banks will convert their current Zimbabwe dollar balances into the new currency," he said.
Additionally, he slashed the bank's main interest rate from 130 percent to 20 percent.
Mushayavanhu said the ZiG would be "fully anchored and fully backed" by a basket of foreign currency and precious metal reserves, primarily gold.
He presented the new banknotes, which range in denomination from 1 to 200 ZiG, saying the move was meant to foster "simplicity, certainty, (and) predictability" in Zimbabwe's financial affairs.
Over the past year, the Zimbabwean dollar has lost almost 100 percent of its value against the US dollar.
According to price tracker Zim Price Check, it traded at around 30,000 against its more coveted US counterpart on Friday.
According to official data, southern African countries' poor performance contributed to their high inflation rate, which reached 55 percent in March after climbing into triple digits last year.
As a result, its 16 million people are already facing widespread poverty, high unemployment, and a severe drought caused by El Nino.
Mushayavanhu said Zimbabweans have 21 days to convert their old cash into new money.
The new banknotes feature a drawing of gold ingots being minted and Zimbabwe's famous Balancing Rocks.
According to official statistics, gold accounted for almost 25 percent of all exports in Zimbabwe in January.
Nevertheless, analysts have questioned whether Harare has enough reserves to adequately support its currency and if the latter could suffer from volatility in gold prices.
Mnangagwa inspected the central bank's vaults on Thursday, which Mushayavanhu, who was appointed earlier this year, said hold 1.1 tonnes of solid gold.
He also noted that the bank had almost 1.5 tonnes more abroad and $100 million in cash and precious minerals such as diamonds, which would account for another 0.4 tonnes of gold if converted into gold.
In total, the reserves total $285 million, which Mushayavanhu said was "more than three times the value of the ZiG currency".
Some were skeptical, however.
Prosper Chitambara, an economist, said that other countries, including South Africa, had much larger reserves than Zimbabwe.
"The greater your reserves, the greater your confidence, and the greater your ability to defend your currency against shocks."
Central bank officials said they would adopt a tight monetary policy, linking money supply growth to gold and foreign exchange reserves.
In 2008, hyperinflation was so out of control that the central bank issued a note worth 100 trillion dollars - now a collector's item.
Eventually, the government adopted the US dollar as legal tender instead of the local currency.
In 2019, the Zimbabwean dollar was revived, but has faced many of the same problems as before.
Zimbabweans prefer to do business, get paid, and save in US dollars.
On payday, many people who earn a salary in local currency rush to currency exchange shops.
It has previously attempted to stabilize the economy by issuing gold coins and launching a gold-backed digital currency, but these efforts have not been successful.
