Zimbabwe’s economy is in chaos, much like the rest of the world’s. Are gold coins really the answer? It’s possible that they just might be, according to the officials in Zimbabwe. The country’s central bank has introduced coins with the name of Victoria Falls. It’s Zimbabwe’s way of dealing with a catastrophic situation.
President Emmerson Mnangagwa’s efforts to reinvigorate the economy have been hampered by the country’s annual inflation rate, which Reuters reports topped around 192% alone in June. Zimbabwe’s government took an unusual step by simultaneously creating a commodity with strong demand and a haven against the rising inflation.
Introducing Gold Coins To Battle Inflation
This month, Zimbabwe’s reserve bank says it plans to sell gold pieces to protect citizens from inflationary pressures.
It will be called the Mosi-oa-tunya, the Zimbabwean word for Victoria Falls, and encompass one troy ounce of gold – a bit bulkier than an imperial oz and equal to 31.1g. The central bank director, John Mangudya, made the announcement.
The bank claims that the currency may be exchanged for cash and used in commerce. There is a good chance that most individuals suffering financially will be unable to purchase it. One troy ounce of gold will now be over $1,600, around £1,300.
Gold’s value varies, yet it is still considered a haven asset. As the local currency’s value has decreased due to high yearly inflation, gold may be a potential measure of wealth. Although US currencies are also accepted as legal money, the nation is now experiencing a dollar shortage, which the introduction of gold coins is expected to alleviate.
The Adoption Of The Gold Coin
According to the emails sent out by the authorities, the gold coins would be accessible to the general public across both domestic currency and US dollar and other major currencies at a price depending on the internationally agreed price of gold as well as the cost of manufacturing.
A serial number will be assigned to the 22-carat coin, making it easy to convert it to cash, exchange it locally and globally, and put it to use in transactions. Mangudya said it might also be used as collateral for loans or lines of credit.
According to IH Securities, a brokerage, investor trust in Zimbabwe’s currency will be boosted by selling coins. It is expected that I n this way, the gold coin market would be distinct from the money or government paper market.
This also means that the central bank may use the sale of Zimbabwean dollar coins to absorb large amounts of the country’s surplus liquidity.
What The Future Holds For Zimbabwe
Mangudya said in a telephone conversation that factors such as food shortages spurred by Ukraine’s civil conflict, increasing gasoline costs, and local exchange-rate volatility are grounds to revise the prognosis for Zimbabwe’s economy. According to the government, inflation is expected to be between 25% and 35% by the end of 2022. Hopefully, this concept of the gold coin and other measures can work out in the government’s favor.