Zimbabwe High Resolution Currency  Concept

Zimbabwe to Launch ‘Gold-Backed’ Currency to Replace Collapsing Dollar

The comments below are an edited and abridged synopsis of an article by GoldBroker

Zimbabwe is set to launch a new currency backed by its gold reserves as part of President Emmerson Mnangagwa’s efforts to address long-standing monetary turmoil. Mnangagwa stated that the country possesses sufficient gold to support the proposed “structured currency.” However, doubts linger among analysts regarding the adequacy of these reserves.

Zimbabwe to Launch ‘Gold-Backed’ Currency to Replace Collapsing Dollar - BullionBuzz
Zimbabwe High Resolution Currency Concept

The decision to introduce the new currency follows the collapse of the current Zimbabwe dollar, which has seen its value plummet by three-quarters against the US dollar benchmark in 2024. The steep decline has been exacerbated by concerns and anticipation surrounding the new currency regime, according to David Mnangagwa, the president’s son and Zimbabwe’s deputy finance minister.

Despite the optimism surrounding the new currency, underlying issues persist, including the government’s practice of printing money to finance expenditures. This has eroded trust in the currency among ordinary citizens, many of whom prefer to hoard cash at home, a phenomenon colloquially known as “mattress banking.” The frequent changes in currency over the past decade have only fueled confusion and instability.

Zimbabwe’s efforts to rebuild reserves and access international markets have been hampered by decades of arrears to official lenders and a lack of multilateral support. Despite Mnangagwa’s attempts to end financial isolation and clear the country’s debt, repeated instances of repression by security forces have strained relations with the US and other governments. The suspension of dialogue on debt relief by the US further underscores the challenges facing Zimbabwe’s economic recovery.

In addition to economic woes, Zimbabwe is grappling with a severe regional drought that has devastated this year’s harvest. Mnangagwa declared a state of disaster and announced the need for over $2 billion to finance the emergency response.

In summary, while the introduction of a new currency backed by gold reserves signals a step towards addressing Zimbabwe’s monetary challenges, underlying economic and political issues continue to cast doubt on the country’s path to stability and recovery.