Zimbabwe launches gold coins after battling with a rise in inflation over a longer period of time.
In an effort to reduce a rise in inflation that has weakened the nation’s fragile currency, Zimbabwe has launched gold coins for sale to the general population.
The Reserve Bank of Zimbabwe, the nation’s central bank, announced the action on Monday by distributing 2,000 coins to commercial banks.
The central bank stated in its announcement that the coins, known as Mosi-oa-Tunya, which in the local Tonga language stands for Victoria Falls, the coin “will have liquid asset status,” which means they “will be capable of being easily converted to cash and will be tradable locally and internationally.”
After 180 days from the date of purchase, holders can only exchange them for cash.
The statement indicates that individuals and businesses would be able to purchase them from authorized retailers like banks and either store them there or take them home.
The only form of payment for the coins for foreigners is foreign currency.
According to John Mangudya, the governor of the Reserve Bank of Zimbabwe, the initial batch was created abroad but would eventually be made locally.
In addition to serving as collateral for loans and credit facilities, the 22-carat coins may be used for purchases in stores, provided the retailer has adequate change.
Their cost will be decided by the price of an ounce of gold on the world market plus 5% for coin production expenses.
At the time of the introduction on Monday, one Mosi oa Tunya cost $1,824.
After many saw their investments destroyed by hyperinflation in 2008, trust in Zimbabwe’s currency is low. From 132 percent in May to 191.6 percent in June, inflation increased significantly.
Zimbabwe is experiencing a severe economic crisis that is characterized by a fast falling local currency, 90 percent unemployment, and a drop in industrial production.
According to independent economist Victor Bhoroma of Harare, “gold coins are a good idea in terms of storing value … but they will likely be indexed in US dollar which means it’s a fundraising scheme to get US dollars from the market by the central bank. The success will thus depend on confidence in the central bank as the seller of the coins and guarantees that back them .”
Internationally, gold coins are utilized as an investment opportunity and an inflation hedge in nations like China, South Africa, and Australia, albeit not to the extent that Zimbabwe’s central bank had envisioned.
All gold mined in Zimbabwe is meant to be sold to the national bank, but many producers choose to smuggle it out of the nation in order to get paid in US dollars.
There are significant gold reserves in Harare, and the export of this precious metal is one of the main sources of foreign exchange for this country in southern Africa.