Facts for Prelims (FFP)
Source: FE
Context: Zimbabwe has launched its newest currency, the ZiG, which is backed by gold and aimed at addressing the country’s long-standing issues with currency instability and hyperinflation.
The ZiG, introduced on April 5, 2024, co-circulates with other foreign currencies in the economy.
About Gold-backed currency:
It has a fixed value directly tied to gold and is convertible into the precious metal. Its money supply is constrained by available gold reserves, offering inherent value and potential long-term stability.
In contrast, fiat currency lacks intrinsic value and is designated as legal tender by governments. Its value is dictated by supply and demand dynamics and isn’t backed by any physical commodity. Fiat currency affords central banks greater control over printing money as needed.
