Zimbabwe unveiled a new currency on Friday to replace its struggling previous one, which has faced depreciation and rejection by the public in recent months. The move aims to address the country’s ongoing currency crisis, indicative of its long-standing economic challenges.
The Reserve Bank of Zimbabwe Governor, John Mushayavanhu, announced that the new currency, named ZiG, will be backed by gold reserves and a basket of foreign currencies, and will be effective starting Monday.
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The Zimbabwe dollar has been under significant pressure lately, ranking among the world’s worst performing currencies. Since January, it has experienced a depreciation of over 70% on the official market, with further declines observed in the thriving but illegal black market.
Inflation has also surged, rising from 26.5% in December last year to 34.8% in January and reaching 55.3% in March, according to official data.
Traders have been increasingly reluctant to accept lower denominations of the old currency, often demanding payment exclusively in U.S. dollars, which are also accepted as legal tender in Zimbabwe.
Mushayavanhu emphasized the importance of safeguarding the local currency, stating that nearly 85% of transactions are already conducted in U.S. dollars. People will have three weeks to exchange their old notes for the new currency.
This latest currency announcement follows a series of measures by the Zimbabwean government to address currency instability dating back to the dramatic collapse of the Zimbabwe dollar in 2009. This period included issuing a 100 trillion Zimbabwe dollar banknote and temporarily adopting the U.S. dollar as legal tender.
In 2016, Zimbabwe reintroduced a domestic currency, leading to renewed currency volatility and policy changes, including the banning and subsequent unbanning of foreign currencies such as the U.S. dollar for domestic transactions in 2019.
