Wednesday, May 22, 2024

Why Zimbabwe has launched a gold-backed currency

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Isaac Kaledzi
Isaac Kaledzi
Isaac Kaledzi is an experienced and award winning journalist from Ghana. He has worked for several media brands both in Ghana and on the International scene. Isaac Kaledzi is currently serving as an African Correspondent for DW.

Zimbabwe has for years struggled with its local currency, ditching it at a point in the past and going back for it.

In 2019 the Southern African country relaunched its own currency after a decade of dollarisation.

That currency has struggled to catch up with the public and win their trust. The country witnessed a surge in domestic transactions, conducted in foreign currency.

On Friday Zimbabwean authorities announced the replacement of the collapsing local currency with a new one backed by gold.

The central bank said it hopes this latest currency will be more stable and help bring down inflation.

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The new currency is called Zimbabwe Gold (ZiG) and will be in circulation alongside foreign currencies, central bank governor John Mushayavanhu told journalists in Harare.

Banks have to convert their current Zimbabwean dollar balances into ZiG with immediate effect.

People have 21 days to exchange their old notes and coins for new ones, the monetary policy statement said.

“If we implement these measures, we expect them to have an impact on inflation,” Mushayavanhu said.

According to the bank, the new currency is “anchored by a composite basket of foreign currency and precious metals (mainly gold) held as reserves for this purpose by the Reserve Bank”.

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