Zimbabwe has started selling gold coins to the general population in a bid to rein in the country’s rampant inflation, which has further depreciated the weak currency.
The Reserve Bank of Zimbabwe, the nation’s central bank, made the historic announcement on Monday in an effort to increase public trust in the domestic currency.
Called Mosi-oa-Tunya, which in the local Tonga language refers to Victoria Falls, 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. The coin may also be used for transactional purposes,” said the central bank.
According to the central bank, the coins, which have a purity of 22 carats and a troy ounce each, can also be used as security for loans and credit facilities.
The price of the coins will be set by the price of an ounce of gold on the global market plus 5% for coin production costs. The price of a Mosi oa Tunya coin was $1,824 at the time of the launch on Monday.
On Monday, the commercial banks received 2,000 coins from the central bank. According to John Mangudya, governor of the Reserve Bank of Zimbabwe, the coins were first struck outside of the nation but would eventually be made there.
“The government is trying to moderate the very high demand for the U.S. dollar because this high demand is not being matched by supply,” said Zimbabwean economist Prosper Chitambara.
Although they are not as widely utilized as currency as envisioned by Zimbabwe’s central bank, gold coins are used internationally in nations like China, South Africa, and Australia to protect against inflation, according to Chitambara.
Analysts argue that because Zimbabwe’s central bank would have to purchase the gold from informal artisanal miners who mine the metal, there may be difficulties and more smuggling.
“Gold deliveries in Zimbabwe have significantly recovered because of the appetizing U.S. dollar payments offered to artisanal miners,” noted securities firm Morgan & Co in a market intelligence report.
Zimbabwe has sizable gold reserves, and the sale of the pricey metal is one of the main sources of foreign exchange for the southern African nation.
According to official statistics, gold production increased from 19 tons in 2020 to nearly 30 tons in 2021. 19 tons of the gold provided in 2021 were produced on a small scale by unregulated artisanal miners, according to official data.
In accordance with the law, all gold extracted in Zimbabwe must be sold to the central bank, but many miners choose to sneak their product out of the country in order to receive paid in U.S. dollars.