Zimbabwe’s central bank launched a new “structured currency” backed by gold on Friday, as it seeks to tackle sky-high inflation and stabilise the country’s long-floundering economy.

The ZiG – short for Zimbabwe Gold – will replace the Zimbabwean dollar which has tumbled in value over the past year, pushing inflation through the roof, Reserve Bank governor John Mushayavanhu said.

“With effect from today… banks shall convert the current Zimbabwe dollar balances into the new currency,” he said, presenting a monetary policy statement.

He also announced a drastic cut in the bank’s main interest rate, from 130% to 20%.

The ZiG will be “fully anchored and fully backed” by a basket of reserves comprising foreign currency and precious metals – mainly gold, Mushayavanhu added.

The move is aimed at fostering “simplicity, certainty, (and) predictability” in Zimbabwe’s financial affairs, he said, presenting the new banknotes that come in eight denominations ranging from 1 to 200 ZiG.

The Zimbabwean dollar has lost almost 100% of its value against the US greenback over the past year.

On Friday, it was officially trading at around 30,000 against its more coveted US counterpart – and at 40,000 on the black market, according to tracker Zim Price Check.

Its poor performance contributed to the southern African country’s high inflation rate, which after climbing well into the triple digits last year, was at 55% in March, according to official data.