Zimbabwe has announced the launch of a new currency, as the country has effectively given up in its effort to salvage the Zimbabwean Dollar.
The new currency which will be called ZiG is set to be introduced on April 8, 2024, with an initial exchange rate set at 13.56 per dollar.
Additionally, a new interest rate of 20% has been established, contrasting sharply with the previous rate of 130% on the old Zimbabwean Dollar.
It is also noted that the new currency will be backed by a diverse basket of foreign currencies, gold, and other precious metals.
The move was announced by, the Zimbabwean Central Bank Governor, John Mushayavanhu, at a press conference in Harare.
- He noted, “We want a solid and stable national currency in this country,” he said. “It does not help to print money. Certainly, under my watch it is not going to happen.”
During the announcement, he also outlined the conversion of current Zimbabwean dollar balances held by banks into the new ZiG currency.
Zimbabwe’s Currency Woes
According to Bloomberg, this latest move marks the sixth attempt by the Zimbabwean Central Bank to establish a sustainable currency since 2008, when IMF estimates put the country’s inflation at 500 billion percent, which rendered the country’s currency worthless.
- This year, the Zimbabwean dollar has shed about 80% of its value in the official market, positioning it as the second worst-performing currency globally.
- The depreciation of the currency has prompted a significant shift, with over 80% of transactions in Zimbabwe now conducted in the US dollars.
- This trend has coincided with a notable acceleration in inflation, rising to 55.3% in March from 47.6% recorded in the preceding month.
What you should know
Zimbabwean President Emmerson Mnangagwa, initially signalled in February the intention of his administration to introduce a “structured currency.”
Subsequently, Finance Minister Mthuli Ncube suggested that this currency could potentially be supported by gold. Consequently, the central bank delayed its monetary-policy statement to fine-tune the plan.
John Mushayavanhu assumed office as central bank governor on March 28, a month earlier than planned. He pledged a shift towards more orthodox monetary policies during his tenure.