The value of the Zimbabwean currency has decreased so drastically that it is said to be one of the most worthless currencies in the world. The plummeting exchange rate made this country decide to replace its currency with a new one.
Zimbabwe’s central bank changed the Zimbabwe dollar to ZiG which is short for “Zimbabwe Gold”. This currency replacement was triggered by a series of economic and political factors that occurred.
Why is Zimbabwe’s Currency Worthless?
Zimbabwe’s currency became worthless due to various factors. The following is an explanation of each factor that influences it.
- Hyperinflation
One of the factors that causes the Zimbabwean currency to be worthless is because of hyperinflation in the country.
In the book Introduction to Micro & Macro Economics (2023) by Isniyati, S.E, M.Ak, hyperinflation is an inflationary condition that is out of control. This condition results in rapid price increases and loss of currency value.
Zimbabwe is known to have experienced hyperinflation over the last two decades. This is what caused the government to abolish the Zimbabwe dollar in 2009.
Since then, the country has operated relying on US dollars and other foreign currencies. However, in 2019, the central bank reintroduced the Zimbabwe dollar.
- Excessive Money Printing
Another factor that caused the value of the Zimbabwean currency to plummet was also influenced by excessive money printing.
Quoting from the Voice of America page, the value of the Zimbabwean currency fell when the Zimbabwean central bank printed excessive banknotes. This was done as an effort to overcome the economic crisis. However, this step actually made things worse. These efforts actually caused Zimbabwe to be hit by very high inflation.
Therefore, to make the currency more stable and help reduce inflation, the relevant government launched a new currency known as Zimbabwe Gold or ZiG.
The presence of ZiG replaces the Zimbabwe dollar which has lost more than 70 percent of its value against the US dollar. ZiG’s new currency is backed by a combination of foreign currencies and precious metals, particularly gold.
ZiG was launched with denominations of 1 to 200. The new currency has an initial value of 13.56 ZiG for every US$1 and will then be determined by the market.
