Why is it in the News?

To address its long-standing economic instability, the Reserve Bank of Zimbabwe (RBZ) has launched a new gold-backed currency called the ZiG, short for Zimbabwe Gold, replacing the Zimbabwean dollar on April 5, 2024.

What is a ZiG Currency?

• Zimbabwe Gold, or ZIG, is the world's newest currency that was introduced by Zimbabwe to replace the Zimbabwe dollar in April.
• It is backed by the country's gold reserves and was launched in an effort to reduce currency instability and hyperinflation.
• It is the sixth currency Zimbabwe has used since the 2009 collapse of the Zimbabwe dollar amid hyperinflation of 5 billion per cent.

Features of ZiG currency:

• Gold-Backed: The ZiG is unique as it is backed by gold reserves, ensuring its value is supported by the physical gold held by the government.
• Denominations: ZiG notes and coins are issued in denominations of 1ZiG, 2ZiG, 5ZiG, 10ZiG, 20ZiG, 50ZiG, 100ZiG, and 200ZiG. This gold backing aims to provide stability and prevent currency devaluation.

Reasons for Launching a New Currency:

• High Inflation: Zimbabwe has struggled with extreme inflation, with rates exceeding 500% in recent years.
• Currency Instability: The Zimbabwean dollar, introduced in 1980, lost its value due to hyperinflation. The country's reliance on various foreign currencies, mainly the US dollar, has limited economic control.
• Historical Collapse: The collapse of the Zimbabwean dollar in 2009, with hyperinflation peaking at 5 billion per cent, is one of the worst currency crashes in history.

Economic Control: Converting the previous national currency, the Zimbabwe dollar, into ZiGs is intended to simplify monetary matters and provide certainty and predictability in the financial system.