Addis Ababa, Ethiopia (07 July 2022)

Only in May of this year did Bloomberg declare the Zimbabwe dollar to be the world’s worst-performing currency. A month after that, the inflation rate more than doubled to 191 percent, bringing back memories of the 2000s hyperinflation, which saw the Zimbabwean dollar redenominated three times before being effectively abandoned in 2009.

Following a resolution agreed upon by its Monetary Policy Committee (MPC) on June 24, 2022, the Reserve Bank of Zimbabwe (RBZ) announced plans to begin issuing gold coins as legal tender in late July in an effort to combat the inflation crisis that has severely weakened the local currency. According to Reuters, the coins will each contain one troy ounce of gold and will be sold by Fidelity Gold Refinery, Aurex, and local banks.

As reported by the Guardian, John Mangudya, governor of Zimbabwe’s central bank, said the gold coins were expected to reduce the demand for US dollars – a phenomenon largely blamed for the tumbling value of the local currency introduced in 2019. The gold coins, dubbed Mosi-oa-Tunya after Victoria Falls, can be converted into cash and traded both locally and internationally at a price determined by the current international gold price and the cost of production.

Economist Prosper Chitambara, while noting that this policy was not an absolute cure-all, explained that gold coins are used by investors internationally to hedge against inflation because they act as a viable investment asset, adding that the high demand for the US dollar in Zimbabwe would weaken as the public accepts the gold coins.

Zimbabweans, however, have mixed and skeptical reactions to the policy action, as the central bank and its policies continue to fail the trustworthiness test. Foreign currency traders who spoke with the Guardian have pointed out inconsistencies that have occurred before and are reluctant to accept this move as a legitimate one.

DISCLAIMER

The opinions expresses here in the post "Zimbabwe Turns to Gold Coins as its Local Currency Continues to Fall in Value" are those of the individua's contributor(s) and do not necessarily reflect the views of Business Info Ethiopia , BIE Intelligence PLC, its publisher, editor, or any of its other contributors.

Share.

Comments are closed.