The inflation-riddled African country turns to the intrinsic value of precious metal in attempt to curb currency devaluation.
In a bid to curb inflation, Zimbabwe has rolled out a currency called Zimb Gold (ZiG) backed primarily with gold and foreign currency reserves.
“With effect from today, banks shall convert the current Zimbabwe dollar balances to ZiG,” Zimbabwe’s Reserve Bank governor, John Mushayavanhu said.
Bloomberg reported that the former Zimbabwean dollar has depreciated against the US dollar every trading day this year, weakening by 72%, resulting in it becoming the world’s second-worst-performing currency. Zimbabwe’s annual inflation rate went up to a seven month high, 55.3% in March, from the 47.6% seen in February.
RT reported that the rising cost of food, utilities and housing plus a state of emergency due to a drought-induced famine have struck the country recently.
This new gold-backed currency comes almost a year after the Reserve Bank of Zimbabwe (RBZ) defied an International Monetary Fund (IMF) warning and created a gold-backed digital currency for peer-to-peer and peer-to-business commerce.
The new currency is the African country’s sixth attempt at a new monetary system since 2008. At one point inflation reached 500 billion percent.
“To promote demand for the ZiG, Zimbabwe will make it compulsory for companies to settle at least 50 percent of their tax obligations using the new unit, according to the central bank,” Natural News reported.
With the outgoing currency so devalued, 80 percent of current Zimbabwe transactions are done in US dollars.
“In a supporting document to clarify the changes, it stated that reserves presently include $100 million in cash and 2,522 kilograms (5,560 pounds) of gold worth $185 million,” Natural News went on to write.
The African bank discussed the national reserves which will be used to back up the value of the new currency.
“The total amount of gold and cash reserve holdings of US$285 million represents more than three times cover for the ZiG currency being issued,” the central bank said in the statement.
