Zimbabweans have 21 days to convert their old cash into new money as Zimbabwe’s central bank has launched a new “structured currency” backed by gold.
This comes as the country seeks to tackle sky-high inflation and stabilise the country’s long-floundering economy.
Authorities hope the new measure will halt a currency crisis underlining the country’s yearslong economic troubles.
The Zimbabwean dollar has come under sustained pressure in recent weeks, making it one of the world’s worst performing currencies.
John Mushayavanhu, the Governor of the Reserve Bank of Zimbabwe, told reporters that the new currency, called Zim Gold (ZiG), will be backed by foreign currencies, gold and precious minerals.
Mushayavanhu said that the ZiG would circulate alongside a basket of other currencies.
He added that the central bank would also introduce a market-determined exchange rate.
“With effect from today … banks shall convert the current Zimbabwe dollar balances into the new currency,” he said.
The move is aimed at fostering “simplicity, certainty, [and] predictability” in Zimbabwe’s financial affairs, he noted, while presenting the new banknotes that come in eight denominations ranging from one to 200 ZiG.
The new notes feature a drawing of gold ingots being minted, as well as Zimbabwe’s famous Balancing Rocks, which already appeared on the old ones.
“We are doing what we are doing to ensure that our local currency does not die. We were already in a situation where almost 85% of the transactions are being conducted in U.S dollars.”
John Mushayavanhu
He announced that people have three weeks to exchange the old notes with the new currency.
On Thursday, April 4, 2024, President of Zimbabwe, Emmerson Mnangagwa inspected the central bank’s vaults that Mushayavanhu, who was appointed earlier this year, said hold 1.1 tonnes of solid gold.
Mushayavanhu disclosed that the bank also has almost 1.5 tonnes more abroad, as well as $100m in cash and precious minerals – such as diamonds, that if converted into gold would account for another 0.4 tonnes.
Altogether, the reserves’ value totals $285m, which Mushayavanhu highlighted was “more than three times cover for the ZiG currency being issued.”
Meanwhile, the central bank added that it would also adopt a tight monetary policy, linking money supply growth to growth in gold and foreign exchange reserves.
Lost Value Of Zimbabwean Dollar
The Zimbabwean dollar has lost almost 100 percent of its value against the US greenback over the past year
Since January, the Zimbabwean dollar lost over 70% of its value on the official market and is plunging even further on the thriving but illegal black market.
Traders were increasingly rejecting lower denominations of the now scrapped currency, with many insisting on payment only in U.S. dollars, which are also legal tender in the southern African country.
According to tracker Zim Price Check, on Friday, April 5, 2024, the Zimbabwean dollar was officially trading at about 30,000 against its more coveted US counterpart and at 40,000 on the black market.
Its poor performance has contributed to the Southern African country’s high inflation rate, which after climbing well into the triple digits last year, was at 55 percent in March, according to official data.
Inflation increased from 26.5% in December last year to 34.8% this January before spiking to 55.3% in March, according to official figures.
The current inflation rate has piled pressure on the country’s 16 million people who are already contending with widespread poverty, high unemployment and a severe drought induced by the El Nino weather pattern.
Soaring prices have also brought back memories of 2008, when hyperinflation was so out of control that the central bank even issued a 100-trillion-dollar note, which is now a collectors’ item.
Amid these economic challenges, analysts question whether Harare has enough reserves to adequately back the new currency, and if the latter could suffer from volatility in gold prices.
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