The African nation of Zimbabwe has recently introduced a structured currency backed by gold to stabilize its falling economy. Zimbabwe’s Gold-Backed Currency comes at a time when the country is facing high inflation rates and a falling economy. Zimbabwe’s Gold-Backed Currency now takes over from the Zimbabwean dollar.
The central government of Zimbabwe mentioned that this move has come into effect by taking into account how the value of the Zimbabwean dollar has decreased against the United States dollar. Thus, this new Zimbabwe’s gold-backed currency, also known as ZiG, was initially introduced electronically last year in April. But now the people of Zimbabwe can use Zimbabwe’s Gold-Backed Currency as banknotes and coins.
As the World Bank had noted, Zimbabwe was fighting currency instability and hyperinflation. In such a scenario, the Reserve Bank of Zimbabwe’s Gold-Backed Currency might have produced some distrust among the citizens.
But, according to the global money lender, the International Monetary Fund (IMF), Zimbabwe’s Gold-Backed Currency or ZiG, can be seen as heralding a new age. This comment by the IMF is a welcome change, as it was heavily against the Southern African nation’s earlier gold-back digital currency.
This change in the IMF’s stance is paving the way for a positive change between the Zimbabwean government and the global money lender. The IMF is also set to send a team to the South African nation in June to monitor the events related to Zimbabwe’s Gold-Backed Currency.
Understanding Zimbabwe’s Gold-Backed Currency: What is Gold-Backed Currency?
In the most general terms, here the money is backed by a certain amount of gold. This backing ensures that the value of the money is stable, as the currency is relative to the market value of the gold. Zimbabwe’s Gold-Backed Currency currently replaces the Zimbabwean dollar.
But, initially, Zimbabwe’s Gold-Backed Currency was introduced to the people in digital form last year. The gold-backed digital currency was not the standalone currency of the country at that time. It was a legal tender that was used along with the Zimbabwean dollar and bond notes. Hence, Zimbabwean nationals and foreigners could purchase or sell the digital currency in exchange for other foreign currencies.
A Brief History of Zimbabwe’s Currency Changes:
Zimbabwe’s Gold-Backed Currency is now the world’s newest currency. As the whole world now awaits to see if this brings about a change in the world economy, Zimbabwe has faced significant economic ruptures and changes since its inception. We will try to trace a brief history of Zimbabwe’s currency change before the introduction of Zimbabwe’s Gold-Backed Currency.
2003:
Zimbabwe has a long history of facing hyperinflation. Keeping in mind these economic downfalls, the International Monetary Fund has been warning them of the dire consequences the country can face for a long time.
It was in 2003 that Zimbabwe tried to combat its cash shortages. To put an end to the cash shortage, they launched a series of low-denomination bearer checks. This was the beginning of several economic reforms to come before Zimbabwe’s Gold-Backed Currency.
2006:
Even as the years roll by, the Southern African nation continues to face inflation. As the economy of the country is in shambles and poverty has reached its peak, the country’s central bank issues several higher-denomination bearer checks. During this time, the price of food items, housing, or education had tripled from what it had been a year before. The country was facing the worst economic scenario it had in years.
The central bank of Zimbabwe had issued a large number of 10 trillion-dollar notes during that time to face inflation and stabilise the economy.
2008:
It was in 2008 when Zimbabwe faced a huge hyperinflation period. The income gap between the poor and rich was exponentially increasing, plunging the country into its worst economic phase. It was under such a scenario that the 100 trillion dollar banknote was launched by the Reserve Bank of Zimbabwe.
Thus, even before Zimbabwe’s Gold-Backed Currency came to be launched, the country was facing several economic issues. Hence, the IMF now believes that Zimbabwe’s Gold-Backed Currency is a welcome change from its previous economic policies, which had failed.
2009:
Under the pressures of globalisation and a bid to end the hyperinflation in the country, Zimbabwe is forced to adopt new policies. This is a time when the country’s citizens were facing more major issues. Thus, a multi-currency system gets introduced in the country by the government. Here, the United States dollar, the euro, and the British pound are launched into the Southern African nation’s market to stabilize the economy and bring peace and harmony to the country.
In the later part of the year, the government observed that the multi-currency system was operating smoothly in the country. Thus, under such a situation, the Zimbabwean dollar gets struck off as a legal tender. Hence, before Zimbabwe’s Gold-Backed Currency the country passed through several other currency systems.
2016:
The country did not see any major economic reform take place between 2009 and 2016. As is noticed with Zimbabwe’s Gold-Backed Currency, it caused a major stir within the global community. But those seven years were relatively eventless in Zimbabwe’s economic reforms.
In 2016, the bond note was introduced as a currency by the central bank of Zimbabwe. Launched in December, the bank claimed that this bond note would have the same worth as the US dollar.
2018:
With a view to nationalising the economy, the country re-launched the Zimbabwe dollar again.
2022:
Zimbabwe’s Gold-Backed Currency started its initial journey in 2022. It was in 2022 that Zimbabwe introduced its gold coins to stabilise the massive economic downfall they were facing. As the state media in Zimbabwe reported, the country has at least 350 kilogrammes of gold in reserve.
2023:
Zimbabwe had launched its gold-backed digital currency, which was seen suspiciously by the IMF. This digital currency, which was launched last year, was initially not welcomed even by the citizens of the country. But soon enough, Zimbabwe’s Gold-Backed Currency has started gaining attention and receiving widespread media support.
2024:
It was in 2024 that Zimbabwe’s Gold-Backed Currency replaced the digital currency and has now become the world’s newest currency system. Although the global banking community has reserves against Zimbabwe’s Gold-Backed Currency, the International Monetary Fund has high hopes for Zimbabwe’s Gold-Backed Currency. They believe that Zimbabwe’s Gold-Backed Currency can bring the country out of its inflationary period.
Zimbabwe’s Gold-Backed Currency, according to the IMF, has the potential to restore economic stability in the country.
Zimbabwe’s Gold-Backed Currency: What is the Ground Reality?
Since the introduction of the US dollar in the Zimbabwean market, most citizens have a blind loyalty to it. For years, people have been using the dollar and are now comfortable with it. So, it can only be seen in time how much Zimbabwe’s Gold-Backed Currency can stand a chance.
As the BBC reported, Zimbabweans have now found a certain comfort in the US dollar. The BBC reported that this comfort could be attributed to the safety that the US dollar provides. Thus, the Zimbabwean government, keeping in mind the country’s mood, has decided to mix Zimbabwe’s gold-backed currency with foreign currencies. Thus, currently, Zimbabwe is functioning under a multi-currency system.
In recent years, Zimbabwe’s inflation rates have gone up to five hundred percent. Zimbabwe’s Gold-Backed Currency is one of the recent attempts by the government and the central bank to tackle its failing economy.
The Reserve Bank of Zimbabwe attributed the weakening economy to the low exchange rate. They believed that the low exchange rate had caused a rise in inflation. In March 2024, for instance, the price rates had increased by 55.3%, which is the highest that the country had seen in seven months.
Zimbabwe’s Gold-Backed Currency is right now the sixth currency that has been launched in the country. The US dollar too has a long history in the nation, where initially it was used as a legal tender, then banned and eventually unbanned.
But, even as Zimbabwe’s Gold-Backed Currency has now been introduced in the market, there is some suspicion and fear among the citizens. As was reported by an international media outlet, a 56-year-old vegetable trader by the name of Kudzanayi Mandi was more inclined to give up her trade than accept Zimbabwe’s Gold-Backed Currency.
Conclusion
The acceptance of Zimbabwe’s Gold-Backed Currency by the International Monetary Fund can be seen as heralding a positive change for the country’s economy. Zimbabwe has faced severe economic challenges and is still in the midst of battling hyperinflation. Zimbabwe’s Gold-Backed Currency is an attempt by the government to restore the state’s economic prosperity.
While there is still a heavy distrust among the citizens about Zimbabwe’s Gold-Backed currency, we can only see how it turns out in the long run. The country has witnessed several changes in its economy over the years, with Zimbabwe’s Gold-Backed Currency being the latest. But the IMF’s trust in Zimbabwe’s recent Zimbabwe’s Gold-Backed Currency can hopefully bring out a positive outcome.
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