The Zimbabwean government has rolled out a new digital currency backed by gold reserves. Set to launch on April 8, 2024, the ZiG (Zimbabwean Investment Gold) is a daring gambit to tame rampant inflation and restore confidence in the nation’s monetary system.
In her struggles with economic challenges, including hyperinflation and currency devaluation, the country has attempted to revive its local currency at least six times since 2008, with the most recent effort being the introduction of the ZiG.
In 2018, after a decade of using foreign currencies, the government reintroduced the Zimbabwean dollar. However, this attempt failed due to the currency’s rapid devaluation and hyperinflation. ZiG aims to stabilize the rapidly devaluing currency and provide a secure investment opportunity for individuals.
How the ZiG Currency Works
The ZiG’s value is directly linked to the price of gold, with an initial exchange rate of 13.56 ZiG per U.S. dollar. This gold-backing is intended to provide a secure store of value, unlike Zimbabwe’s previous currency which rapidly lost value. While the ZiG exists as a digital token, not physical cash, its worth is backed by actual gold reserves. It will trade at the same value as Zimbabwe’s Mosi-oa-Tunya gold coins.
The Reserve Bank of Zimbabwe (RBZ) has pledged to use external auditors to ensure the ZiG remains fully backed by gold at all times. Its value will move alongside international gold prices. To drive adoption, the government has lowered transaction fees for ZiG compared to foreign currency, making it a cheaper option.
The Rollout Plan
At launch, the RBZ will convert all Zimbabwean dollar bank balances into the new ZiG currency based on the April 5th exchange rate and gold prices. Citizens can swap their old Zimbabwean dollar bills for new ZiG notes 21 days after the launch. The initial ZiG supply will have notes from 1 ZiG to 200 ZiG, along with fractional coins of 0.25 ZiG and 0.5 ZiG.
RBZ Governor John Mushayavanhu stated that the ZiG banknotes and coins will start circulating in the economy from April 30 to allow the central bank to “undertake an intensive educational and awareness campaign” on the new currency.
Part of a Bigger Strategy
Zimbabwe’s ZiG rollout is a critical part of the government’s broader efforts to tackle economic instability brought on by years of hyperinflation. By linking the ZiG’s value to gold, authorities aim to provide Zimbabweans with a reliable unit of account, a store of value, and a way to make payments.
Bloomberg reported disruptions in banking across Zimbabwe as lenders rushed to convert all Zimbabwe dollar account balances to ZiG. However, RBZ said “satisfactory progress” has been made by the banking sector in converting balances in line with the monetary policy statement measures. “The conversion process will continue for other economic sectors until Friday April 12,” Mushayavanhu said in an emailed statement. “Thereafter, the Reserve Bank expects that all the online payment platforms will be operating smoothly for all transactions in the economy.”
Whether the ambitious ZiG project can truly restore economic order remains to be seen. But the stakes for Zimbabwe’s future are high as this bold monetary experiment begins.
