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ZiG Rises 0.4% in 2 Days, Backed by Gold and $100M Reserves

Zimbabwe launches ZiG currency, backed by gold and foreign reserves, to combat economic instability and restore confidence.

By Max Weldon

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4/10, 02:57 EDT
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Key Takeaway

  • Zimbabwe's gold-backed currency, the ZiG, rose 0.2% to 13.50 against the dollar, marking a cumulative gain of 0.4% since its introduction.
  • Backed by 2,522 kilograms of gold and $100 million in foreign reserves, the ZiG represents Zimbabwe's sixth attempt at a new currency.
  • Despite its introduction, most retail and government transactions continue in dollars amid slow adoption by banks.

Zimbabwe's Bold Currency Experiment

Zimbabwe has launched a new currency, the ZiG, short for Zimbabwe Gold, in a bold move to stabilize its economy and restore confidence in its monetary system. This initiative represents the country's sixth attempt to introduce a stable national currency amidst a backdrop of hyperinflation and economic instability. The ZiG, which is backed by 2,522 kilograms of gold and approximately $100 million in foreign currency reserves, aims to address the persistent devaluation issues that have plagued previous currencies, including the Zimbabwe dollar which lost value every trading day this year before being abandoned.

Initial Market Response

The ZiG debuted with an exchange rate of 13.56 to the US dollar and strengthened to 13.53 per US dollar a day after its launch, marking a cumulative gain of 0.4% since its introduction. Despite the positive initial response, the transition has been challenging, with most of the nation's lenders and businesses still working to switch their systems to accommodate the new currency. Only a third of the financial institutions linked to the ZimSwitch national payments platform are currently able to process ZiG payments. This has led to disruptions in commerce, with some government departments halting services and businesses, including the Zimbabwe Electricity Supply Authority, urging customers to pay in US dollars until the transition is complete.

Digital Currency Initiative and Skepticism

Parallel to the ZiG, Zimbabwe has introduced a gold-backed digital currency aimed at facilitating peer-to-peer and business transactions. This initiative positions Zimbabwe alongside other African nations exploring digital currencies as a means to stabilize their economies. However, the introduction of both the ZiG and the digital currency has been met with skepticism. Critics, including former Finance Minister Tendai Biti and economist Godfrey Kanyenze, have expressed doubts about the effectiveness of these measures, citing a "confidence and trust deficit" stemming from Zimbabwe's history of currency instability and hyperinflation. The success of the ZiG and the digital currency in addressing Zimbabwe's economic challenges remains uncertain.