Zimbabwe’s monthly inflation rate has surged to its highest level since the introduction of the ZiG, the nation’s new bullion-backed currency, in April 2024.
INTRODUCING | #Zimbabwe Introduces Zim Gold, the New Currency Backed by Gold and Precious Minerals
According to reports, the Central Bank’s vaults hold 1.1 tonnes of solid gold. It also has almost 1.5 tonnes more abroad, as well as $100 million in cash and precious minerals –… pic.twitter.com/WkAjB655zq
— BitKE (@BitcoinKE) April 8, 2024
On August 26 2024, the ZiG depreciated by 0.2% against the U.S. dollar, hitting a record low of 13.82.
According to the Zimbabwe National Statistics Agency, consumer prices rose by 1.4% in August 2024, reversing a 0.1% decline recorded in July 2024. The main drivers of this inflation spike were increases in the cost of food and non-alcoholic beverages, the agency reported during an online briefing.
The ZiG, or Zimbabwe Gold, was launched in April 2024 to replace the Zimbabwean dollar which had repeatedly failed since its re-introduction in 2019, leading to rampant inflation.
As reported by BitKE in 2021, inflation in Zimbabwe at that time stood as follows:
July 2020 – 838%
January 2021 – 363%
May 2021 – 162%
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In July 2024, the Zimbabwean Finance Minister, Mthuli Ncube, ordered that government services be paid for in the local ZiG currency, part of new measures to boost demand for the nation’s gold-backed currency.
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A crackdown, led by the central bank’s financial intelligence unit and police, to defend the ZiG from speculation on the parallel market, has… pic.twitter.com/uhHERL81ku
— BitKE (@BitcoinKE) July 29, 2024
The ZiG represents Zimbabwe’s sixth attempt in 15 years to establish a stable local currency.
In Q1 2024, blended year-on-year (YoY) inflation in Zimbabwe was at 55.3% while the Zimbabwe dollar lost over 90% of its value, and has hardly moved in Q2 2024. The ZiG, however, has reportedly ignited institutional and retail investor confidence particularly within the Zimbabwean stock market.
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Increasing reserves will allow the central bank to issue more ZiG currency, moving it closer to its goal of reducing the country’s dependence on… pic.twitter.com/TvIoIyphtU
— BitKE (@BitcoinKE) July 17, 2024
Although the ZiG has recently maintained relative stability against the dollar, a severe drought has exacerbated food inflation and is expected to continue affecting prices until the next harvest, projected for March 2025.
Zimbabwe is facing significant food shortages and requires up to $400 million to secure 290,000 tons of maize, a crucial staple, according to the United Nations’ World Food Programme. To address the shortfall, the government and private millers are importing grain, but this move risks additional pressure on the exchange rate, as noted in July 2024 by Governor, John Mushayavanhu.
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