In a bid to stabilize its economy and combat soaring inflation, Zimbabwe’s central bank announced on Friday the introduction of a new currency, supported by gold and foreign currencies. The move comes amidst the collapse of the local currency, which has seen a drastic depreciation of over 70% since the beginning of the year, driving inflation rates beyond 55% annually.
Named Zimbabwe Gold (ZiG), the new currency will operate alongside foreign currencies, as revealed by central bank governor John Mushayavanhu during a press conference held in the capital, Harare. The decision marks a significant shift from the country’s previous attempt to relaunch its own currency in 2019, which failed to gain public trust, with over 80% of domestic transactions now conducted in foreign currencies.
The central bank also announced a substantial adjustment in its main interest rate, slashing it to 20% from the previous 130%, in efforts to further stabilize the economy. This decision was part of a broader monetary policy statement released by the Reserve Bank of Zimbabwe, which outlined the framework for the new currency.
The exchange rate for ZiG will be determined based on the closing interbank exchange rate on April 5th and the London PM Fix price of gold on April 4th. Described as a “structured” currency, ZiG will be backed by a composite basket of foreign currencies and precious metals, primarily gold, held as reserves by the central bank.
Addressing reporters, Mushayavanhu expressed optimism that these measures would help curb inflation. Banks are instructed to convert their current Zimbabwean dollar balances into ZiG immediately, while citizens will have 21 days to exchange their old currency for the new one.
Friday’s announcements mark the conclusion of months-long deliberations between the central bank and the finance ministry on currency reforms. The central bank also disclosed that it holds $100 million in cash reserves and 2.52 tonnes of gold, valued at $185 million, as part of its reserve assets.
