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Monday, May 27, 2024

Zimbabwe Launches Gold Coins As Legal Tender To Curb Inflation

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Zimbabwe launched gold coins to the public in an unprecedented move to curb inflation and boost confidence in the local currency.

This move was announced on Monday by the country’s central bank, the Reserve Bank of Zimbabwe and has already disbursed the first 2000 coins to commercial banks.

The coin, called Mosi-oa-Tunya, which in the local Tonga language refers to Victoria Falls, is one ounce of 22 carat gold and bears an image of Victoria Falls, Zimbabwe’s world famous natural wonder.

Zimbabwe has been in an economic crisis for several years with a massive wipe out in people’s savings in 2008 due to the hyperinflation which reached five billion percent according to the IMF. This in turn caused a low confidence in the currency leaving a vast group of the population turning to illegal markets to buy the US dollar

Governor of the Reserve Bank of Zimbabwe, John Mangudya.

According to the governor of the Reserve Bank of Zimbabwe, John Mangudya, the 2000 coins disbursed was minted outside the country but the subsequent disbursement will be produced locally.

Any individual or company can buy the coins from authorised outlets such as banks using local currencies or foreign currencies. The coins can be traded or used for transactional purposes like making purchases in shops etc, depending on whether the shop has enough change.

Foreigners can buy the coins only in foreign currency, said the central bank and the coins “will have liquid asset status, that is, it will be capable of being easily converted to cash, and will be tradable locally and internationally”, said the central bank.

“The coin may also be used for transactional purposes,” it said. People holding the coins can only trade them for cash after 180 days from the date of buying, it added.

The coins, each weighing one troy ounce with a purity of 22 carats, can also be used as security for loans and credit facilities, said the central bank. Gold coins are not as widely used locally around the world, Zimbabwe now joins countries like China and South Africa that already accept this as local currency.

Previous metals are one of Zimbabwe’s major foreign currency earner, with it’s gold deposit export increased from 19 tons in 2020 to 30 tons in 2021 according to official figures.

Although the average citizen might not directly benefit initially but the expectation is that this move will stabilise the local currency, attract more investors and maintain the stable prices of consumer goods.

Zimbabwe has substantial gold deposits and exports of the precious metal are one of the country’s major foreign currency earners. Gold production improved to about 30 tons in 2021, compared with 19 tons in 2020, according to official figures.

The price of the coins will be determined by the international market rate for an ounce of gold, plus 5% for the cost of producing the coin.

At the time of the launch on Monday, the cost of Mosi oa Tunya coin was 1,824 dollars (£1,514).

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