Zimbabwe introduces new gold-backed currency to tackle inflation | Business and Economic News

Zimbabweans have 21 days to exchange their old currency for new currency, the central bank said.

Zimbabwe's central bank has launched a new gold-backed “structured currency” as it seeks to tackle sky-high inflation and stabilize the country's long-term economy.

The new currency, called Zim Gold (ZiG), will be backed by foreign currencies, gold and precious minerals, Reserve Bank of Zimbabwe Governor John Mushayavanhu told reporters in the capital Harare on Friday.

Mushayavanhu said the ZiG will be in circulation with a basket of other currencies.

He said the central bank would also introduce a market-fixed exchange rate.

“Effective today … banks will convert existing Zimbabwean dollar balances into the new currency,” he said.

The move aims to foster “simplicity, certainty.” [and] In Zimbabwe's financial affairs, he also introduced new banknotes in eight denominations ranging from one to 200 gg.

The new notes feature an image of gold bars and Zimbabwe's famous Balancing Rocks, which already appeared on the old ones.

Mushayavanhu said Zimbabweans have 21 days to exchange their old money for new money.

Reserve Bank of Zimbabwe Governor John Mushayavanhu launched the ZIG notes [Jekesai Njikizana/AFP]

Is there enough balance to withdraw the new currency?

The Zimbabwe dollar has lost almost 100 percent of its value against the US greenback over the past year.

On Friday, it was officially trading at 30,000 against its much-loved US counterpart — and 40,000 on the black market, according to Tracker Jim's price check.

Its poor performance has contributed to the southern African country's high inflation rate, which stood at 55 percent in March, according to official data, after climbing well into triple digits last year.

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The current rate of inflation piles pressure on the country's 16 million people, who already struggle with widespread poverty, high unemployment and severe drought triggered by the El Niño weather pattern.

The Fed even issued a $100 trillion note that is now a collector's item, bringing back memories of 2008 when hyperinflation ran out of control.

Amid these economic challenges, analysts have questioned whether Harare has enough reserves to adequately support the new currency, and whether the latter will be affected by fluctuations in the price of gold.

On Thursday, President Emmerson Mnangagwa inspected the central bank's vaults, which Mushayavanhu, who was appointed earlier this year, said held 1.1 tonnes of solid gold.

Mushayavanhu said the bank has almost 1.5 tons more overseas, as well as $100 million in cash and precious minerals – such as diamonds – that could be converted into gold and another 0.4 tons.

In total, the reserve is valued at $285 million, which Mushayavanhu noted “more than triples the amount of ZiG coin to be issued.”

Meanwhile, the central bank added that it will also maintain a tight monetary policy that links money supply growth with growth in gold and foreign exchange reserves.

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