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Zimbabwe, in its latest bid to end the serial collapse of the local dollar, has replaced it with a new unit called ZiG, which will be backed by a basket of foreign currencies, gold and other precious metals.
Central Bank Governor John Mushayavanhu told a press conference in Harare, the capital, on Friday, that the ZiG would be launched on April 8 at an introductory rate of 13.56 per dollar and a new interest rate set at 20%.
That compares with the 130% on the old unit, which was the highest central bank rate in the world. Banks will convert their current Zimbabwean dollar balances into the ZiG, he said.
"We want a solid and stable national currency in this country,” he said. "It does not help to print money. Certainly under my watch it is not going to happen.”
File photo: Bond notes in the capital Harare, Zimbabwe, November 28, 2016.
The sweeping move is Zimbabwe’s 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.
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’s second worst-performing currency.
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.
The inflation rate is expected to decline to 2% to 5% by year-end as a result of the currency changes, the governor said.
President Emmerson Mnangagwa first hinted in February that his government will introduce a "structured currency.” Then, Finance Minister Mthuli Ncube said it may be backed by gold and the central bank postponed its monetary-policy statement to give final touches to the plan.
Mushayavanhu, who took over as central bank governor on March 28 - a month earlier than the initial start date - pledged a return to more orthodox monetary policies.
"We are not going to be involved in any quasi-fiscal activities,” he said. "I have no intention to do other people’s jobs.”
