Zimbabwe, in its latest bid to end the serial slide of the local dollar, has replaced it with a new unit called the ZiG backed by a basket of foreign currency and gold.<\/p>\n\n\n\n
Central Bank Governor John Mushayavanhu told a press conference in Harare, the capital, on Friday, that the ZiG \u2014 short for Zimbabwe Gold \u2014 would be launched on April 8 at an introductory level of 13.56 per dollar and a new interest rate set at 20%.<\/p>\n\n\n\n
That compares with the 130% on the old unit, which was the highest central bank rate in the world. Banks will immediately convert current Zimbabwean dollar balances into ZiG, he said.<\/p>\n\n\n\n
The rand is currently trading around R18.60 to the dollar.<\/p>\n\n\n\n
No Printing Press<\/strong><\/p>\n\n\n\n \u201cWe want a solid and stable national currency in this country,\u201d he said. \u201cIt does not help to print money. Certainly under my watch it is not going to happen.\u201d<\/p>\n\n\n\n The sweeping move is Zimbabwe\u2019s sixth attempt to have a functional local currency since 2008, when inflation crossed 500 billion percent, according to International Monetary Fund estimates, rendering it worthless.<\/p>\n\n\n\n To foster demand for the ZiG, Zimbabwe will make it mandatory for companies to settle at least 50% of their tax obligations via the new unit, the central bank said.<\/p>\n\n\n\n Worst Performing<\/strong><\/p>\n\n\n\n The current Zimbabwean dollar has lost four-fifths of its value on the official market since the start of the year, making it the world\u2019s second worst-performing currency.<\/p>\n\n\n\n The plunging currency has led to more than 80% of transactions being done in dollars and inflation quickening to 55.3% in March from 47.6% the prior month.<\/p>\n\n\n\n The currency changes are expected to cool annual inflation to between 2% and 5% by year-end and monthly to below 1%, the governor said.<\/p>\n\n\n\n President Emmerson Mnangagwa first hinted in February that his government will introduce a \u201cstructured currency.\u201d The plan was delayed to give final touches.<\/p>\n\n\n\n Mushayavanhu, who took over as central bank governor on March 28 \u2014 a month earlier than the initial start date \u2014 pledged a return to more orthodox monetary policies.<\/p>\n\n\n\n \u201cWe are not going to be involved in any quasi-fiscal activities,\u201d he said. \u201cI have no intention to do other people\u2019s jobs.\u201d<\/p>\n\n\n\n To rebuild public confidence, the ZiG will be fully backed by a combination of gold and other precious metals, plus foreign currency reserves held at the central bank.<\/p>\n\n\n\n In a supporting document to explain the changes, it said that reserves currently include $100 million in cash and 2,522 kilograms of gold worth $185 million.<\/p>\n\n\n\n \u201cThe total amount of gold and cash reserve holdings of US$285 million represents more than 3 times cover for the ZiG currency being issued,\u201d it said in the statement.<\/p>\n\n\n\n
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