Gold-backed Token Replaces Zimbabwe Dollar

The Reserve Bank of Zimbabwe has launched Zimbabwe Gold, or the ZiG, in both paper and coin forms following its initial debut as a digital payment method in October.

This new currency, which replaces the Zimbabwean dollar, is supported by a combination of gold and foreign currencies.

According to Bloomberg, the central bank started distributing the physical currency on April 29, and by the end of that day, all of the country’s lenders had received their supply.

The ZiG's launch was officially announced on April 5, with an exchange rate set at 13.56 ZiG to the U.S. dollar.

Although digital trading of the ZiG began on April 2, it was first introduced in October at a rate tied to the price of gold.

The switch to the new currency caused significant disruptions in the local stock market. Businesses are now required to pay at least 50% of their taxes in ZiG.

Upon introducing the new currency, the central bank set its interest rate at 20%, a decrease from a previous high of 130%.

Central bank governor John Mushayavanhu, who assumed office on March 28, stated that the inflation rate in Zimbabwe is expected to drop from 55% to 2% annually due to the new, more stable currency.

Currently, over 80% of transactions in Zimbabwe are conducted using U.S. dollars, and the Zimbabwean dollar has depreciated by almost 75% this year alone.

The ZiG is backed by 2.5 tons of gold and $100 million in foreign currency reserves, amounting to a total value of $285 million, which is three times the value of the ZiG being issued, according to Mushayavanhu.

He stated at an April 5 press conference:

“We want a solid and stable national currency in this country. It does not help to print money. Certainly under my watch it is not going to happen.”

In 2023, Zimbabwe ranked third in Africa for cryptocurrency use. However, the International Monetary Fund opposed the introduction of the gold-backed currency after the plan for the ZiG was announced in April 2023.

Sources:

https://cointelegraph.com/news/physical-gold-backed-token-replaces-zimbabwe-dollar

https://www.bloomberg.com/news/articles/2024-04-29/zimbabwe-central-bank-holds-key-rate-at-20-in-first-meeting-since-zig-debut

https://www.bloomberg.com/news/articles/2024-04-22/-zig-usd-zimbabwe-s-zig-wipes-out-330-stocks-rally-investors-count-losses

https://www.bloomberg.com/news/articles/2024-04-05/zimbabwe-replaces-battered-dollar-with-unit-linked-to-gold-fx

https://twitter.com/ARTUZ_teachers/status/1785308473397293248