To stabilize its new currency, Zimbabwe has announced that it will not print additional ZiG notes unless these can be fully backed by adequate reserves. The statement was made by Central Bank Governor John Mushayavanhu during a meeting in Bulawayo, Zimbabwe’s second-largest city. This decision comes as part of a broader strategy to prevent the depreciation of the newly introduced ZiG, short for Zimbabwe Gold.
The introduction of the ZiG on April 5 marked Zimbabwe’s sixth attempt to establish a stable local currency after the Zimbabwean dollar, which depreciated daily before being discontinued earlier this year. The new currency is backed not only by gold but also by a basket of foreign currencies, a structure advised by the World Bank. “We are not going to increase the amount of money in circulation until it’s backed by adequate reserves,” Mushayavanhu assured, conveying a directive from the president to avoid printing money without secure backing.
Governor Mushayavanhu revealed that the creation of the ZiG involved significant guidance from international experts, including a consultant from the World Bank. “We got a consultant from the World Bank on the structured currency; a lot of things came from the World Bank,” he said. This approach was chosen over other options such as merely slashing zeros from the defunct Zimbabwean dollar or fully dollarizing the economy, which were considered less viable. Busisa Moyo, chairman of the Zimbabwe Investment Development Authority, also involved in the consultative process, shared insights at the meeting, noting that the US dollar was used in more than 80% of transactions, emphasizing the need for a more locally controlled economic tool.
The central bank has a strategic plan to strengthen its financial reserves by accumulating gold. “The central bank plans to boost its gold reserves with royalty payments from miners and is targeting adding about 2 tons of bullion annually,” Mushayavanhu explained. This initiative is part of Zimbabwe’s broader economic strategy to reinforce the credibility of the ZiG and ensure its value remains stable against major currencies.
The move to back the ZiG strictly with reserves is a critical step toward restoring confidence in Zimbabwe’s monetary system, which has suffered from hyperinflation and instability in the past. By tying the new currency to tangible assets like gold and securing it with foreign currency reserves, Zimbabwe aims to protect the ZiG from the rapid devaluation that plagued its predecessor.
