Zimbabwe Launches New Gold-Backed Currency to Fight Inflation

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Zimbabwe's central bank is making a fresh attempt to combat inflation with the introduction of a new gold-backed currency, the Zimbabwe Gold (ZiG). This comes after the previous currency, the Zimbabwe dollar, lost a staggering 80% of its value this year alone.

Why the new currency?

• Soaring inflation: Zimbabwe has a long history of hyperinflation, with prices rising at an alarming rate. In March, inflation reached a seven-month high of 55%.

• Dollar dominance: Public trust in the local currency is extremely low, with most transactions happening in US dollars (around 80% of the population).

• US dollar coin shortage: This has led to bizarre situations where people receive their change in sweets or pens.

Can the ZiG succeed?

• Skepticism exists: Experts like Hasnain Malik from Tellimer believe fundamental economic reforms are needed, not just a new currency.

• Potential benefits: The ZiG could alleviate the US dollar coin shortage and encourage wider use of local currency.

• Government efforts: Companies will be required to pay at least half of their quarterly taxes in ZiG, promoting its use.

• Long road ahead: Zimbabwe has a history of failed attempts to curb inflation. Success hinges on rebuilding trust and tackling underlying economic issues.

Looking forward:

• The central bank has a plan to gradually increase the use of the ZiG, potentially reducing reliance on the US dollar.

• Membership in the BRICS's New Development Bank could further this goal by promoting local currency loans.

Only time will tell if the ZiG can finally tame inflation and stabilize Zimbabwe's economy.

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