Zimbabwe has recently made a significant move to address its currency challenges by introducing a new foreign exchange and gold-backed structured currency. This initiative, announced in the latest monetary policy statement by Reserve Bank of Zimbabwe (RBZ) governor John Mushayavanhu, aims to stabilize the country’s monetary system amidst high inflation rates.

The new currency, known as Zimbabwe Gold (ZiG), is backed by a combination of foreign exchange reserves and precious metals held by the central bank. This backing is designed to ensure the stability and value of the currency in the market, marking a significant effort by RBZ to tackle Zimbabwe’s currency challenges.

RBZ governor John Mushayavahu has confirmed that the ZiG currency will come in various denominations and will co-circulate with other foreign currencies in the country. Local banks will begin converting Zimbabwe dollar balances into ZiG based on interbank exchange rates and gold prices to boost confidence in the country’s monetary system.

Some of the central bank’s other measures include a substantial reduction in the annual interest rate from 130% to 20% to encourage investment and economic growth by making borrowing more affordable. The stability of the new currency is supported by strong macroeconomic fundamentals and substantial reserve assets, including foreign currency and gold reserves.

While the transition to the new currency has caused disruptions in local dollar transactions across financial institutions in Zimbabwe, normal banking services are expected to resume once the adjustment is complete. Despite challenges faced by some banks during the transition, U.S. dollar-based transactions continue to be processed seamlessly.

Zimbabweans have been given 21 days to convert their old cash into the new currency, highlighting the complexity of such transitions in the country’s history of currency reforms.

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