Zimbabwe has unveiled the world’s latest currency innovation – the ZiG. Officially termed Zimbabwe Gold, the ZiG commenced circulation on April 5, 2024, and will coexist with other foreign currencies in the economy. Zimbabwean banks have been converting the erstwhile Zimbabwe dollar into ZiGs, marking a significant shift in the nation’s monetary framework.
The conversion rate, established by Zimbabwe’s central bank, hinges on the interbank exchange rate and gold prices as of April 5, 2024. This rate underpins the lawful transformation of all Zimbabwean dollar (ZW$) deposits within the banking sector, ZW$ loans and advances, the pricing of goods and services in ZW$, and other ZW$-denominated liabilities.
ZW$ notes and coins held by account holders are being credited into their ZiG accounts at the designated conversion rate. Banks have been mandated to accept these deposits for 21 days post-April 5, 2024.
ZiG denominations are issued in increments of 1ZiG, 2ZiG, 5ZiG, 10ZiG, 20ZiG, 50ZiG, 100ZiG, and 200ZiG, distributed through standard banking channels. These notes and coins are entirely backed by the corresponding value of gold and foreign currency reserves.
The introduction of the ZiG aims to alleviate the long-standing currency instability and hyperinflation that Zimbabwe has endured for decades. The nation has grappled with severe inflation, reaching upwards of 500% in recent years. In March 2024, the annual inflation rate spiked to 55.3%, the highest in seven months.
A significant proportion of Zimbabweans prefer the stability of the US dollar, which constitutes over 85% of transactions, according to the BBC. Consequently, the central bank has opted for a multi-currency system, combining the ZiG with foreign currencies.
The success of the ZiG in gaining public trust and becoming a stable local currency remains to be seen, as policymakers strive to regain control of monetary policy.
As of April 5, 2024, the central bank holds reserve assets of USD 100 million in cash and 2,522 kilograms of gold (equivalent to USD 185 million), backing the entire local currency component of reserve money, which currently stands at ZW$2.6 trillion. This requires complete (100%) coverage by gold and cash reserves amounting to USD 90 million. The current gold and cash reserves represent more than three times the coverage of the local currency being issued.
