Zimbabwe won’t print more ZiG notes unless backed by adequate reserves

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Zimbabwe won’t print additional ZiG notes unless it has the reserves to back the new currency, as that could cause it to tank, central bank Governor John Mushayavanhu said.

“We are not going to increase the amount of money in circulation until it’s backed by adequate reserves,” he told delegates at a meeting Wednesday held in the second-biggest city of Bulawayo. “The president instructed me not to print money without reserves.”

The ZiG, short for Zimbabwe Gold unveiled on April 5, is the nation’s sixth attempt at establishing a functioning local currency. The new unit is fully backed by gold and a basket of foreign currencies and replaced the foundering Zimbabwean dollar, which lost value every single trading day of this year before it was scrapped.

The southern African nation relied on advice from the World Bank to create the structured currency, which policymakers didn’t initially have much knowledge about.

“We got a consultant from the World Bank on the structured currency, a lot of things came from the World Bank,” Mushayavanhu said. The authorities also consulted local business groups including the Confederation of Zimbabwe Industries and the Zimbabwe Chamber of Mines, he said.

The ZiG was chosen over slashing zeros on the Zimbabwean dollar that last traded at 30,672 per greenback  and fully dollarizing the economy, Busisa Moyo the chairman of the Zimbabwe Investment Development Authority, who was part of the consultative process, said at the event. The greenback is used in more than 80% of transactions.

The central bank plans to boost its gold reserves with royalty payments from miners, and is targeting adding about 2 tons of bullion annually, Mushayavanhu said.