FX.co ★ Zimbabwe launches new gold-backed currency

Implementing effective solutions for socioeconomic development is a daunting challenge. Economics is widely regarded as a nonexperimental science. However, the current environment forces some governments to resort to economic experiments.

Thus, Reserve Bank of Zimbabwe Governor John Mushayavanhu unveiled the new gold-backed national currency called ZiG, short for Zimbabwean gold.

Reportedly, all reserves of the Zimbabwean dollar will be converted into the newly introduced currency, which is anchored to foreign currency and precious metal reserves. The exchange rate set by the bank is 13.5 Zimbabwean gold per US dollar.

Given that the country is suffering from hyperinflation, the official exchange rate for one unit of US currency is about 22,500 Zimbabwean dollars. The black market exchange rate can be as high as 36,000 Zimbabwean dollars.

The country faced uncontrolled hyperinflation last summer after the government made a number of ineffective policy decisions. However, Finance Minister Mthuli Ncube and President Emmerson Mnangagwa chalked it up to private business, the stock exchange, banks, Western sanctions, and even one of Africa's largest insurance companies.

Notably, the Zimbabwean dollar has been setting negative records since 2007. The lowest exchange rate was recorded in November 2008, when inflation in the country peaked at an astounding 79.6 billion percent.