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WHY ZIMBABWE INTRODUCED THE NEW ZiG CURRENCY



  Jun 03, 2024

WHY ZIMBABWE INTRODUCED THE NEW ZiG CURRENCY



WHAT IS ZiG?

ZiG stands for "Zimbabwe Gold," the new gold-backed currency introduced by Zimbabwe to stabilize its economy.

WHY WAS ZiG INTRODUCED?

1. Economic Crisis:

Zimbabwe's economy has been in crisis for 25 years, with frequent currency issues and high inflation.

The previous currency, the RTGS dollar, lost three-quarters of its value in a year.

Annual inflation reached 55% in March, a seven-month high.

2. Stabilize the Economy:

The ZiG aims to bring stability to the economy by being backed by gold and foreign exchange, ensuring its value remains stable.

3. Public Mistrust:

Zimbabweans have a historic mistrust of the central bank due to past issues, such as the 2008 hyperinflation crisis.

The government promises not to overprint the currency, as happened before with the bond note.

4. Legal Tender:

While the ZiG is being introduced, the US dollar will remain legal tender.

Most people prefer using US dollars, which are more stable and widely accepted.

5. Practical Issues:

The new currency includes banknotes and coins to address the shortage of US coins, which has led people to receive change in sweets and small items.

HOW WILL ZiG WORK?

Zimbabweans have 21 days to exchange their old, inflation-hit notes for the new ZiG currency.

The central bank has committed to backing the local currency with precious minerals, mainly gold, or foreign exchange to prevent it from over-supply and losing value.

Example:

Imagine if your pocket money kept losing value every week. One week, you could buy a burger, but the next, you could only buy fries with the same amount. That’s what was happening with Zimbabwe's old money. The new ZiG currency is like getting a new allowance that doesn't lose value, making it easier for you to buy what you need without worrying about your money becoming worthless. Plus, it's backed by gold, which means it's more reliable and won't lose value as quickly as the old money.


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