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Zimbabwe is Moving to a Gold-Backed Currency

Published by honor in category Market News on 09.04.2024
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The Governor of the Central Bank of Zimbabwe (CB), John Mushayavanu, announced the introduction of a new national currency, ‘Zimbabwean Gold’ (ZiG).

It represents the most recent effort to stabilise an economy that has spent the last 25 years teetering between crises.

The CB of Zimbabwe announces the introduction of a new currency, the Zimbabwean Gold (ZiG). This currency will be issued in the form of banknotes and coins.

All Zimbabwe dollar reserves will be converted into the new currency. The new currency will be secured by the country’s foreign currency and precious metal reserves

said the Central Bank Governor.

This move by the President’s government was made with the aim of overcoming a decade of monetary chaos – with March seeing a seven-month high of 55% annual inflation. Zimbabweans have 21 days to exchange old, inflation-hit notes for the new local currency.

13.5 Zimbabwe Gold Equates to 1 US Dollar

According to the head of CB, the exchange rate of the new currency will be 13.5 Zimbabwe Gold to one US dollar.

However, the US dollar, which makes up 85% of transactions in Zimbabwe, will continue to be a legal tender therefore may still be a popular currency to use.

The new ZiG banknotes come in denominations of between 1 and 200

Zimbabwe is also introducing coins to overcome the shortage of US coins, which has seen people receive change in the forms of sweets, small chocolates and pens.

In 2008, Zimbabwe experienced an unprecedented surge in inflation, reaching staggering heights of 90 sextillion percent annually amidst an economic meltdown. Citizens found themselves carrying bags brimming with paper money, while the value of bills soared with each passing day, accumulating more zeros. At that time, the maximum nominal value for currency was a hundred trillion dollars.

The Start of the New Currency

During a press conference held in Harare on April 4th, it was declared that commercial banks are mandated to convert all Zimbabwean dollar balances into the new currency, ZiG.

Following an inspection of the central bank’s vaults, President Mnangagwa announced that the nation possesses sufficient gold reserves to support the introduction of the new “structured currency.”

Nevertheless, doubts linger regarding the accuracy of the president’s vision in the long term. In 2022, the government began trials of minting 1 troy ounce gold coins. Previous reports indicated that Zimbabwe’s National Bank, the Central Bank of Zimbabwe, has gold holdings of over one tonne of gold in its vaults, with an additional 1.5 tonnes stored overseas.

The Zimbabwean Ministry of Finance disclosed that the government also maintains $300 million in banks. Comparatively, South Africa, its largest neighbour, boasts reserves of approximately an amount of gold amounting to 125 tons of gold.

How will this end? Only time will tell…

Gold price (XAU-GBP)
1,839.37 GBP/oz
  
+ GBP5.94
Silver price (XAG-GBP)
24.21 GBP/oz
  
+ GBP0.34

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