HARARE – Zimbabwe will introduce a new “structured currency” linked to foreign currencies and gold that it expects to provide more stability than its weakening dollar and help rein in inflation, new central bank governor John Mushayavanhu said on Friday.

As the Zimbabwean dollar tumbled this year from under 6,000 to above 33,000 to the U.S. dollar, annual inflation soared beyond 55 percent in March, evoking bitter memories of hyperinflation over a decade ago.

The new currency – called Zimbabwe Gold (ZiG) – will be backed by foreign currencies, gold and precious minerals, Mushayavanhu told a press conference in Harare, adding that it would circulate alongside a basket of other currencies.

He said the central bank would also introduce a market-determined exchange rate.


“If we implement these measures, we expect them to have an impact on inflation,” Mushayavanhu said.

The central bank also set its main interest rate at 20 percent, which it said was a re-calibrated rate, a drastic cut from the previous rate of 130 percent.

Finance Minister Mthuli Ncube said in February that authorities were considering linking the exchange rate to hard assets such as gold and creating a currency board.

The announcement is the culmination of months of deliberations between the central bank and finance ministry about how to arrest inflation and stabilise the Zimbabwean dollar.

“This recalibrated monetary policy framework aims to address the current state of price and exchange rate instability in the economy. It is informed by two strategic policy pillars of restoring price and exchange rate stability, and re-monetising the local currency for it to serve its role as a medium of exchange and a store of value in a multi-currency system. The policy seeks to rebuild market confidence and trust, as well as bank policy credibility,” Mushayavanhu said.

“The sequential approach will be anchored on five policy measures: adoption of a market-determined exchange rate system; efficient and optimal money supply management; introduction of a new structured currency; anchoring local currency on reserves backed by gold and foreign currency balances and support measures and obligations in response to market demands.”

Mushayavanhu said the auction system used to determine daily exchange rates for the Zimbabwe dollar has been replaced by a refined interbank foreign exchange market under a willing-buyer-willing-seller (WBWS) trading arrangement.

“Following this development, a transparent price discovery mechanism is now in place in the interbank market. The Bank will continue to provide trading liquidity to the market using the 25 percent surrender proceeds from exports,” he said.

The central bank would strictly adhere to statutory limits on bank lending to the government, he said, partly blaming “quasi-fiscal activities” for past instability, adding that these would be “discontinued.”

Starting next Monday, Mushayavanhu said Zimbabweans can swap their old Zimbabwe dollar bank notes for ZiG notes for the next 21 days. Banks were directed to convert current Zimbabwe dollar balances to the ZiG.

“The swap rate will be guided by the closing interbank exchange rate and the price of gold as at April 5, 2024,” he said.

The ZiG opened with an exchange rate of US$1 : 13.5616 ZiG. Based on the interbank rate of US$1 : ZWL33,903 on Friday, 1 ZiG was worth ZWL2499.

The ZiG notes and coins will be issued in denominations made up of 1ZiG, 2ZiG, 5ZiG, 10ZiG, 20Zig, 50ZiG, 100ZiG, and 200ZiG. Coins of half ZiG and quarter ZiG are also currently being minted.

Mushayavanhu said as of Friday, the RBZ’s reserve asset holdings comprise of US$100 million in cash and 2.522 tonnes of gold worth US$185 million to back the entire local currency component of reserve money which currently stands at ZW$2.6 trillion requiring full cover of gold and cash reserves amounting to US$90 million. The total amount of gold and cash reserve holdings of US$285 million represents more than three times cover for the ZiG currency being issued, he said.

He said the starting exchange rate of the ZiG would be determined by the prevailing closing interbank exchange rate as at April 5, and the London PM Fix price of gold as at April 4, 2024.

“The intervening exchange rate shall be determined by the inflation differential between ZiG and USD inflation rates and the movement in the price of the basket of precious minerals held as reserves. The weights will be determined by the composition of reserve assets,” he explained.

He said the RBZ would apply measures to gradually promote the increased use of the new currency, including making it mandatory for companies to settle at least 50 percent of their tax obligations on quarterly payments dates in ZiG.

IN FULL:  2024 Monetary Policy Statement