Zimbabwe is introducing local digital tokens in the hope of reducing reliance on the US dollar.
Zimbabwe will launch a digital currency next month by introducing “tokens” that are backed by gold reserves and can be transferred between people and businesses as a form of payment, the country’s central bank said on Friday.
The move is aimed at shoring up Zimbabwe’s faltering national currency, the Zimbabwe dollar, which is fast depreciating amid yearslong economic woes in the southern African nation.
The Bahamas, Jamaica and Nigeria have already launched digital currencies backed by their central banks, with several other countries, including China, running trial projects.
People will be able to buy the tokens through banks and make transactions using “e-gold wallets or e-gold cards” held by banks, he said.
Trust in Zimbabwe’s currency is desperately low after people in 2008 had their savings wiped out by hyperinflation, which reached 5 billion percent, according to the International Monetary Fund, nearly a world record.
The hyperinflation resulted in the country at one point issuing a 100 trillion Zimbabwe dollars banknote before the government was forced to temporarily scrap its currency and allow the US dollar to be used as legal tender.
A brief timeline of Zimbabwe’s currency collapse
1998-2007: Due to monetary policy mismanagement, Zimbabwe’s annual inflation rate hit 47% in 1998. Over the next decade, hyperinflation kept on getting worse. The government’s poorly implemented land reform initiatives stymied agricultural production, and a food supply crunch sent prices spiraling upward. The banking sector collapsed due to economic sanctions imposed by the US, European Union, and the IMF. Then, the Zimbabwe government printed huge sums of new bills to fund action in the Democratic Republic of the Congo, and underreported it, tipping the scales
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