In early April, Zimbabwe launched a new currency called Zimbabwe Gold (ZiG), fully backed by gold and foreign reserves, aiming to replace the US dollar within two years. President Emmerson Mnangagwa announced this at an event, predicting ZiG’s nationwide acceptance soon. Backed by 100 tonnes of gold and $100 million in reserves, ZiG initially exchanged at 13.56 per US dollar but has since slightly depreciated. Zimbabwe previously banned and then lifted the ban on US dollars, and now plans to fine businesses that don’t use the official ZiG rate, emphasizing a dramatic shift in its economic strategy.

Zimbabwe launched its own currency, Zimbabwe Gold (ZiG), in early April. Its value is totally supported by tangible reserves of precious metals, particularly gold, and foreign exchange.

As reported by Sputnik, Zimbabwe’s new currency, Zimbabwe Gold (ZiG), will become the country’s sole means of payment over the next two years, displacing the US dollar from the national monetary system, Zimbabwean President Emmerson Mnangagwa announced on Thursday at the Mutare Teachers College Fruit Juice and Water Processing Plant commissioning ceremony.

“In two years’ time — in fact, two years is too far — we will get to the point where I see that the ZiG is available in every part of the country,” he stated. “We are getting there. When you go to the shops carrying US dollars, they will refuse to accept them.”

ZiG is backed by 100 tons of gold and the government’s $100 million foreign exchange reserves. At the outset, the ZiG exchange rate was set at 13.56 Zimbabwean gold per US dollar. Since then, the ZiG has fallen by 1.5% against the USD. On the Zimbabwean financial market, the exchange rate at the start of trading on July 5 was $1 for 13.76 ZiG.

Interestingly, in the summer of 2019, the Zimbabwean government prohibited the circulation of US dollars in the country. However, nine months later, the prohibition was lifted.

In mid-May, Western media reported, citing a government notice, that the country will penalize enterprises who do not adopt the official new currency rate to support ZiG.

Zimbabwe will punish businesses that utilize inflated exchange rates now that the Zimbabwe Gold (ZiG) has been adopted, according to Western media reports quoting a government notice on Friday.

Any business that employs an exchange rate higher than the official rate of 13.5 ZiG per US dollar would reportedly face a 200,000 ZiG ($14,815) penalty.

Furthermore, selling “goods or services at an exchange rate above the prevailing interbank foreign currency selling rate” would be a civil infraction, according to media reports citing the notice.

Some establishments, such as supermarkets, are reportedly charging a premium over the market rate for customers who pay with the new currency, while informal traders have refused to accept the ZiG.

Zimbabwe’s authorities announced on Tuesday that the country’s yearly budget would be converted to ZiG.

The ZiG represented Zimbabwe’s sixth effort since 2008 to develop a stable indigenous currency. The Zimbabwean currency’s tremendous decline versus the US dollar this year, losing almost 80% of its value, has made budgeting more difficult.

Last year, GreatGameIndia reported that the Reserve Bank of Zimbabwe introduced a gold-backed digital currency fully supported by physical gold held by the bank, potentially paving the way for gold-backed money.