This comes amid a bid by the southern African nation to stabilize its economy and counteract the devaluation of its previous currency, the Zimbabwean dollar.
Reserve Bank of Zimbabwe Gov. John Mushayavanhu declared on Friday, April 5, while displaying the nation's 2024 monetary policy statement that the "structured currency" or ZiG will be set primarily in gold and foreign currency reserves.
"With effect from today, banks shall convert the current Zimbabwe dollar balances to ZiG," Mushayavanhu stated, while adding that it "will circulate with other currencies in the basket."
He cited that the central bank would also enforce a market-determined exchange rate.
"If we implement these measures, we expect them to have an impact on inflation," Mushayavanhu said. "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."
The country's former currency, the Zimbabwean dollar, had depreciated against the U.S. dollar every trading day this year and has diminished in value by 72 percent, making it the world's second worst-performing currency.
As reported by the Zimbabwe National Statistics Agency, the country's annual inflation rate rose to a seven-month high of 55.3 percent in March, up from 47.6 percent in February. The growing costs of food and utilities, along with housing, were the main sources of the increase. (Related: Zimbabwe defies IMF, sells gold-backed digital tokens to stabilize volatile currency.)
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Zimbabwe's sixth attempt to reset currency since 2008
The move to create the new Zimbabwe gold currency is the country's sixth attempt to reset its currency into something functional since 2008, when inflation at one point crossed as high as 500 billion percent, making the country's money effectively worthless.
To promote demand for the ZiG, Zimbabwe will make it compulsory for companies to settle at least 50 percent of their tax obligations using the new unit, according to the central bank.
Currently, traders in the southern African nation are rejecting lower denominations of the former Zimbabwean dollar due to its perceived worthlessness, insisting instead on paying for transactions with the U.S. dollar, which is also a legal tender in Zimbabwe.
The plummeting currency has resulted in more than 80 percent of transactions being done in dollars and inflation hastening to 55.3 percent in March from 47.6 percent the previous month.
Mushayavanhu said the currency changes are anticipated to cool yearly inflation to between two percent and five percent at the end of the year and monthly to below one percent.
Mushayavanhu, who took over as central bank governor on March 28, which was a month earlier than the original start date, promised a return to more orthodox monetary policies.
"We are not going to be involved in any quasi-fiscal activities. I have no intention to do other people's jobs," Mushayavanhu said.
To restore public confidence, the ZiG will be fully supported by a combination of gold and other precious metals, in addition to foreign currency reserves held at the central bank.
In a supporting document to clarify the changes, it stated that reserves presently include $100 million in cash and 2,522 kilograms (5,560 pounds) of gold worth $185 million.
"The total amount of gold and cash reserve holdings of US$285 million represents more than three times cover for the ZiG currency being issued," the central bank said in the statement.
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Watch this video from economist Lynette Zang commenting on why she thinks a gold-backed currency might not be enough to save Zimbabwe.
This video is from the What is happening channel on Brighteon.com.
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