The Reserve Bank of Zimbabwe has introduced Zimbabwe Gold (ZiG) in both paper and coin formats, marking a significant shift from the Zimbabwean dollar. ZiG, which debuted as a digital payment method in October, is now replacing its predecessor and is supported by a combination of gold reserves and foreign currencies.
Physical distribution of the new currency commenced on April 29, with all banks in the country gaining access to the physical currency supply by day's end, as reported by Bloomberg. ZiG was officially unveiled on April 5, with an initial exchange rate set at 13.56 ZiG to USD.
While digital trading on ZiG commenced on April 2, its initial launch in October saw its value pegged to the price of gold, causing disruptions in local stock markets. Businesses operating within Zimbabwe will now be mandated to allocate at least 50% of their taxes in ZiG. As part of the currency transition, the central bank has reduced interest rates from a record-high of 130% to 20%. John Mushayavanhu, the recently appointed central bank governor, anticipates a significant drop in inflation, projecting a decrease from 55% to 2% annually with the adoption of the more stable ZiG currency. Currently, over 80% of transactions in Zimbabwe are conducted in U.S. dollars, while the Zimbabwean dollar has experienced a steep decline, losing nearly 75% of its value within the current year alone.
The backing of ZiG comprises 2.5 tons of gold and $100 million in foreign exchange reserves, totaling a value of $285 million. Mushayavanhu emphasizes that this amount is triple the value of ZiG issued, underscoring the stability intended for the national currency. In a statement during an April 5 press conference, he expressed the central bank's commitment to establishing a stable currency and acknowledged the futility of resorting to excessive money printing. Notably, Zimbabwe ranked third in Africa for cryptocurrency usage in 2023. However, upon the announcement of the ZiG plan in April of that year, the International Monetary Fund voiced opposition to the introduction of a gold-backed currency.
