Zimbabwe has made a new currency backed by gold and foreign exchange to fix its current currency problems. The country’s fight against high inflation rates has taken a significant leap forward with this.
In his first monetary policy speech, John Mushayavanhu, the new head of the Reserve Bank of Zimbabwe (RBZ), made news. The new currency of the country, Zimbabwe Gold (ZiG), is meant to make its banking system more stable.
Zimbabwe’s Strategic Move Backing Stability with ZiG Currency
That’s how much ZiG is worth: the central bank holds foreign exchange funds and rare metals. This helps keep the currency’s value stable and safe on the market, giving people a real choice when the economy is uncertain.
The move comes after the RBZ tried to fix problems with funds by putting out digital coins and bond notes backed by gold in the past. People didn’t like these efforts, though, and they didn’t have the desired effect.
Governor Mushayavanhu made it clear that ZiG would be used with other money. Zimbabwe dollars will be changed into Zimbabwe ghī based on the price of gold and the exchange rate between banks.
Mushayavanhu says the project aims to build trust in the banking system and provide a stable way to do business. The central bank reduced the annual interest rate from 130% to 20%. By making it easier for people to borrow money, this is meant to boost spending and economic growth.
The introduction of ZiG is a big change for Zimbabwe’s money system. Still, the RBZ says the currency will stay stable because of strong macroeconomic factors and large reserve assets, such as gold and foreign currency reserves.
There have been some problems with the switch to the new currency, though. Bloomberg reports that transactions in the local currency at all of Zimbabwe’s banking institutions have been slowed down. Transactions in local dollars have been temporarily stopped while banks prepare to accept ZiG. After this change is over, normal banking services should start up again.
Many banks, including South Africa’s Nedbank Ltd., experienced system downtime during the currency change and had to reconfigure their systems to work with the new currency scheme. Zabron Chilakalaka, CEO of ZimSwitch, a big payments company, called the changes a “rebasement” of funds amounts. Some banks can convert the money independently, but others need help from a seller.
It’s still possible to buy things with U.S. dollars, despite some problems. It was especially hard to change currencies when Zimbabwe had hyperinflation in 2008, which shows how hard it can be to make these changes.
People in Zimbabwe have 21 days to change their old funds into new funds. The government wants to stabilise the payment system, as this change is very important.
