Zimbabwe Introduces New Gold-Backed Currency to Replace Depreciating Dollar

President Emmerson Mnangagwa of Zimbabwe has praised citizens for embracing the new Zimbabwe Gold (ZiG) currency, which officially went into circulation on Tuesday, April 30, 2024. The ZiG notes and coins are replacing the rapidly depreciating Zimbabwe dollar, providing relief to the transacting public.

The Reserve Bank of Zimbabwe (RBZ) has set weekly cash withdrawal limits at ZiG3,000 for individuals and ZiG30,000 for corporates to manage the initial rollout. Schools, hospitals, clinics, and local authorities are allowed to withdraw up to ZiG250,000 per month, while government ministries can withdraw up to ZiG300,000. There are no withdrawal limits for parliament, courts, and international organizations.

President Mnangagwa urged Zimbabweans to embrace the ZiG currency as a symbol of the country's national identity and dignity. "The new currency is a symbol of Zimbabwe's national identity and dignity," he stated. The president also called on citizens to emulate the dedication and patriotism shown by fallen national heroes.

The ZiG notes and coins come in denominations ranging from ZiG1 to ZiG200 and are all produced locally. The new currency is backed by US$100 million in foreign currency reserves and 2.5 tonnes of gold valued at US$185 million held by the RBZ.

Why this matters: The introduction of the ZiG currency marks a significant step in Zimbabwe's efforts to stabilize its economy and combat hyperinflation. The gold-backed currency aims to restore confidence and trust in the country's monetary system, which has been plagued by the collapse of the Zimbabwe dollar.

Market players have expressed readiness to embrace the ZiG notes and coins, anticipating that they will bring about transacting convenience and enhance smooth business operations. The RBZ Monetary Policy Committee has affirmed its commitment to consolidating the positive sentiments and ensuring a quick restoration of confidence, trust, and anchoring of inflation expectations.

Banks have been instructed to undertake due diligence when processing cash requests to ensure the facility is not used for criminal activities. Requests above the set limits must be submitted to the Financial Intelligence Unit (FIU) with valid grounds. Banks are prepared for the rollout and are conducting publicity campaigns to inform the public about the new currency.

While the introduction of the ZiG currency has been widely welcomed, some individuals and companies have expressed concerns over the withdrawal limits. The ZiG is currently trading at 20 per US dollar on the black market, compared to the official exchange rate of US$1:ZiG13.2889. The RBZ has stated that it will maintain the current policy matrix, including the Bank Policy rate at 20% per annum and an interest rate corridor of 11.25%, to support the tight monetary policy stance and ensure the success of the new currency.

Key Takeaways

• Zimbabwe launched a new gold-backed currency, the Zimbabwe Gold (ZiG), to replace the depreciating Zimbabwe dollar.
• ZiG notes and coins have withdrawal limits: ZiG3,000 for individuals, ZiG30,000 for corporates, and higher limits for institutions.
• The ZiG currency is backed by US$100 million in foreign reserves and 2.5 tonnes of gold valued at US$185 million.
• The ZiG currency aims to stabilize Zimbabwe's economy and restore confidence in the country's monetary system.
• While welcomed, some have expressed concerns over the withdrawal limits, and the ZiG trades at 20 per US dollar on the black market.