African country eyes gold currency
Seeking to curb inflation, which reached 191% in June, the Central Bank of Zimbabwe announced on Monday it will soon start issuing gold coins. The government in Harare hopes this will reduce the demand for US dollars and at least slow down the further debasement of the local currency, but the general public appears unconvinced.
The Central Bank governor, John Mangudya, said the coins should become available in late July via local banks and currency exchanges. Named Mosi-oa-Tunya, after the Victoria Falls, they will contain one troy ounce of gold and serve as legal tender, convertible into cash locally and internationally.
“The gold coins will be available for sale to the public in both local currency and US dollars and other foreign currencies at a price based on the prevailing international price of gold and the cost production,” Mangudya said in a statement.
Pursuant to the resolution of the Monetary Policy Committee of 24 June 2022 to introduce gold coins into the market as a store of value, the Reserve Bank of Zimbabwe @ReserveBankZIM wishes to advise the public on the salient features and characteristics of the gold coin. pic.twitter.com/BwR0DDHO2V— Ministry of Information, Publicity & Broadcasting (@InfoMinZW) July 4, 2022
The Central Bank hopes that using the coins as a store of value will reduce the demand for US dollars, which Harare blames for the ongoing collapse of the national currency, known as the Zimdollar or zollar (ZWL). Meanwhile, Mangudya has outlined plans to treat the American dollar as legal tender for the next five years. Last week, the Central Bank raised interest rates from 80% to 200%.
“Gold is expensive,” currency trader Munesu Mandiopera told The Guardian, when asked about the new coin. “Many will continue to keep their money at home. This is another failed move by the government.”
The move comes as both the US and China are showing renewed interest in Zimbabwe – most notably for its deposits of lithium, the largest in Africa and fifth-largest worldwide. The Bikita mine in the Masvingo province sits on an estimated 11 million tons of the metal most commonly used in batteries. China’s Sinomine Resource Group recently bought the mine for $180 million and announced last month it would invest another $200 million to expand operations.
Meanwhile, US President Joe Biden has nominated a veteran diplomat who served in Ukraine, the UK, and Turkey as the next American ambassador to Zimbabwe. Pamela Tremont’s current posting was as chargé d’affaires in Sweden, during which the traditionally neutral country announced it wished to join NATO.
The original Zimbabwean dollar, introduced in 1980, started out on par with the US currency but traded 100:1 by 2000. By the time the fourth iteration of the Zimbabwean dollar was abandoned, in September 2009, it was trading at 300 trillion ZWR to one US dollar.