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Zimbabwe Breaks from US Dollar With New Gold-Pegged Currency


Zimbabwe Launches Empowering New Gold-Backed Currency

For decades, Zimbabwe has been shackled by the lingering chains of colonialism and Western domination over its economy and currency. But no more. With the bold launch of the gold-backed  , Zimbabwe has unlocked itself from its neocolonial cage and taken a defiant leap toward full economic sovereignty.

By breaking from the US dollar and asserting control over its monetary policy, Zimbabwe strikes a blow against the neo-imperial financial system that has kept African nations beholden to their former colonial masters. This is a declaration of independence – not just from a currency, but from an entire exploitative global order.

The new ZiG currency signals the rise of a proud African spirit that refuses to cower and obey the dictates of Western interests. Zimbabwe has set in motion a tidal wave that could sweep the continent, inspiring other African nations to reclaim their economic destiny.

For Zimbabwe, this is a new golden dawn after decades lost in darkness. By harnessing its immense mineral wealth, it can now chart its own course, unencumbered by the burdens of the past. The time has come to shake off the last chains of colonial money and roar forward toward a brighter future as masters of a nation’s own destiny.

With the ZiG, Zimbabwe strikes a mighty blow against those who aim to keep Africa forever trapped and poor. The sound of those shattering chains will echo across the continent and beyond. A fierce new optimism is dawning – no longer will Africa take the crumbs from its own table.

Years of Economic Turmoil and Currency Instability

Zimbabwe has been gripped by economic turmoil for decades, lurching from one crisis to another. The southern African nation has struggled to manage its currency and combat hyperinflation since independence. Recently, the economic situation has deteriorated rapidly, with the Zimbabwean dollar losing over two-thirds of its value against the US dollar in the past year.

In an attempt to stabilize the economy and restore confidence in the currency, the Reserve Bank of Zimbabwe has unveiled a new gold-backed currency known as the ZiG. ZiG stands for “Zimbabwe Gold” and the currency aims to be a stable alternative to the highly inflationary Zimbabwean dollar.

The launch of the ZiG represents a major policy shift by the government of President Emmerson Mnangagwa. The ZiG will be set at a fixed exchange rate against the US dollar, backed by the nation’s gold reserves. By pegging the currency to gold, the central bank hopes to curb the rampant money printing and inflationary spiral that had rendered the old Zimbabwean dollar worthless.

The unveiling of Zimbabwe’s new gold-backed currency represents a watershed moment not just domestically, but geopolitically. By breaking from the US dollar and asserting control over its own monetary policy, Zimbabwe strikes a blow against the neo-colonial financial architecture that has kept African nations beholden to Western interests for decades.

The ZiG signals a resurgent spirit of independence and self-determination across the continent. Just as a rising China has rejected dollar hegemony in favor of the yuan, Zimbabwe is empowering itself by leveraging its own natural wealth.

This gold-linked currency could well inspire other African nations to follow suit in prioritizing sovereign control over their economies. The move may mark a pivot point toward a multi-polar global system, no longer dominated by an imperious dollar that has been weaponized for political ends.

Central bank governor John Mangudya announced the surprise move during a press conference in the capital Harare. He declared that the ZiG will begin circulating immediately, with Zimbabweans given a 3-week window to exchange their old banknotes for the new currency.

A Defining Moment For Zimbabwe and Africa

Introducing a new currency represents a new golden beginning for Zimbabwe’s financial system. The ZiG will be backed by the nation’s abundant gold reserves and foreign exchange in order to preserve its value. Which will decisively foster stability and confidence after years of uncertainty.

The issuance of the gold-backed ZiG is an acknowledgement by the Zimbabwean authorities that their existing currency had completely collapsed after excessive money printing. The Zimbabwean dollar had devalued from parity with the US dollar in 2019 to less than a hundredth of a cent within 3 years.

By 2024, the Zimbabwean dollar was virtually worthless, having lost over 75 percent of its value just within the past 11 weeks. This produced an inflationary crisis, with prices of basic goods in supermarkets doubling from one month to the next. A loaf of bread that cost only 6,105 Zimbabwean dollars in January 2024 had skyrocketed to 19,357 dollars by March.

With such extreme inflation and devaluation, the old Zimbabwean currency had completely lost the trust of the public. Citizens had resorted to using US dollars for 85 percent of transactions, despite government attempts to ban foreign currencies. Most Zimbabweans had lost all faith in the central bank and local currency after several failed reintroductions and reform efforts over the past decade.

The government knows it cannot build an economy when their people have no confidence in the currency. That is why they are starting afresh with the ZiG, which will have full gold backing to guarantee its stability. They are committed to macroeconomic discipline and not printing excess money that fuels inflation.

Zimbabwe Severs Ties With The U.S. Dollar

The new ZiG banknotes will be available in denominations from 1 to 200. Coins will also be minted, as there has been an acute shortage of US coins in circulation, forcing retailers to improvise by providing sweets or pens as change. Under the new system, the central bank aims to ensure sufficient availability of low denomination ZiG notes and coins for daily transactions.

Economists have long called for Zimbabwe to officially dollarize by adopting the US dollar or rand as its sole legal tender. However, nationalism made the political elite reluctant to surrender monetary sovereignty. As a compromise, the ZiG allows Zimbabwe to have its own currency while pegging it to an external benchmark for discipline.

The central bank governor stated that the ZiG would be initially valued at 13.56 to the US dollar, reflecting its gold backing. The old Zimbabwean dollar had deteriorated to around 40,000 per US dollar on the black market by the time of its demise. By maintaining the new currency’s peg to gold, authorities hope to avoid the printing and devaluation that wrecked previous incarnations of the local dollar.

To support the ZiG’s value, the Reserve Bank of Zimbabwe has accumulated hard currency reserves backed by physical gold holdings. The bank revealed it has over 2.5 tonnes of gold in its local and offshore vaults, supplemented by an additional US$100 million in foreign exchange reserves. The total value amounts to around $285 million based on current gold prices.

Mangudya asserted, the new currency “shall be anchored in and backed or covered by a composite basket of foreign currency reserves and precious metals received, mainly gold and valuable minerals”

Zimbabwe Analysts Question Sustainability

However, some financial analysts questioned whether Zimbabwe’s reserves are adequate to sustainably peg the new currency. They cautioned against overpromising, given the central bank’s history of blowing through reserves when financing lavish government spending and budget deficits.

The business community hopes the ZiG can restore stability, but remains cautious after being burned by past failed currency reforms. Companies are taking a wait-and-see approach, concerned that fiscal indiscipline could undermine the new currency as happened before.

Ordinary citizens also expressed skepticism, having endured economic turmoil for a generation. Most people’s salaries and savings were wiped out multiple times by bouts of hyperinflation over the years. This has bred an enduring lack of faith in any legal tender issued by the central bank.

US dollars and South African rands remain the preferred currencies for savings and transactions by the majority of Zimbabweans. For the ZiG to gain public trust, it must demonstrate durability and hold its peg against external shocks.

But if the central bank maintains fiscal discipline and currency stability, economic analysts say the gold-backed ZiG has potential to restore confidence in monetary policy. Amid engrained distrust, rebuilding Zimbabwe’s battered economy remains a monumental challenge. But the country hopes this currency reset finally puts it on a path toward normalcy.

Ensuring Fiscal Discipline and Currency Stability

The unveiling of the ZiG represents a significant shift by the Mnangagwa administration to acknowledge that unrestrained money printing had destroyed Zimbabwe’s economy. It marks an overdue departure from the inflationary policies that prevailed under former President Robert Mugabe’s 37-year rule until his ouster in 2017.

During the Mugabe era, the central bank repeatedly cranked up the printing presses to fund runaway spending, fueling hyperinflation. This resulted in the demise of the old Zimbabwean dollar when monthly inflation peaked at 231 million percent in 2008, rendering the currency worthless.

Behind the scenes, a heated debate raged between fiscal conservatives like Ncube and central bankers who wanted looser monetary policy to prop up the floundering Mnangagwa administration. The ideologues seemed to have prevailed initially, with Mugabe-era policies remaining in place, until the currency collapsed again.

With inflation returning to triple digits by mid-2024 and the Zimbabwean dollar crashing rapidly, Mnangagwa finally lost patience. He dismissed long-time central bank chief John Mangudya in April and appointed technocrat John Mushayavanhu as the new governor.

Mushayavanhu arrived with a mandate to halt the printing presses and restore macroeconomic stability. As a first step, he presided over the introduction of the gold-linked ZiG, signaling government recognition that fiscal indiscipline and currency debasement had failed.

The ZiG’s impact will reverberate widely if it succeeds, but risks becoming just the latest false dawn if fiscal indiscipline returns. For now, cautious hope prevails that Zimbabwe has finally reached its turning point toward lasting stability and growth.

Impact Beyond Zimbabwe

The launch of Zimbabwe’s gold-pegged currency is a defining moment, both nationally and globally. By freeing itself from the US dollar and taking control of its monetary policy, Zimbabwe strikes a blow to the neo-colonial financial systems that have constrained African nations for decades.

The new ZiG currency signals the rise of an independent spirit across Africa. Similar to how a resurgent China rejected dollar dominance for the yuan, Zimbabwe is empowering itself using its own natural resources.

This gold-backed currency could inspire other African countries to follow suit and prioritize self-rule over their economies. Zimbabwe’s move may mark a turning point toward a more balanced global order, no longer controlled by the mighty US dollar that has been used as a political tool.

Regardless of whether the ZiG succeeds or fails, its symbolism is strong – Africa is awakening to a new era where its countries stand as equals, not subordinates, on the world stage. By boldly asserting control over its currency, Zimbabwe scores a victory for the whole continent.

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