Zimbabwe introduces gold coins as legal tender for the first time to curb inflation

HARARE, Zimbabwe — Zimbabwe has launched gold coins to be sold to the public in a bid to tame runaway inflation that has further eroded the country’s unstable currency.

A Zimbabwe Central Bank official holds a sample of a gold coin at the launch in Harare on Monday. Tsvangirayi Mukwazhi/Associated Press

The unprecedented move was announced Monday by the country’s central bank, the Reserve Bank of Zimbabwe, to boost confidence in the local currency.

Confidence in Zimbabwe’s currency is low after people saw their savings wiped out by hyperinflation in 2008, which the IMF says hit 5 billion percent.

With strong memories of that catastrophic inflation, many Zimbabweans today prefer to scour the illicit market for scarce US dollars, to keep at home for savings or daily transactions. Trust in Zimbabwe’s currency is already so low that many retailers will not accept it.

The central bank paid out 2,000 coins to commercial banks on Monday. The first batch of coins were minted outside the country, but eventually they will be produced locally, according to Reserve Bank of Zimbabwe Governor John Mangudya.

The coins can be used for purchases in stores, depending on whether the store has enough change, he said.

“The government is trying to dampen the very high demand for the US dollar because there is no supply to match this high demand,” said Zimbabwean economist Prosper Chitambara.

“The expectation is that … there will also be moderation in terms of local currency devaluation, which should have some stabilizing effect on the pricing of goods,” he said.

According to an announcement by the country’s central bank, any person or business can buy the coins from authorized outlets such as banks and store the coins at a bank or take them home. Foreigners can only buy the coins in foreign currency, the central bank said.

The coins, named Mosi-oa-Tunya, which refers to Victoria Falls in the local Tonga language, will have “liquid asset status, meaning they can be easily converted into cash and will be tradable locally and internationally . The coin can also be used for transactional purposes,” the central bank said. People who own the coins can only exchange them for cash after 180 days from the date of purchase, the bank said.

The coins, which weigh one troy ounce each and have a purity of 22 carats, can also be used as collateral for loans and credit facilities, the central bank said. The price of the coins is determined by the international market price for an ounce of gold plus 5 percent of the coin’s production cost. At the time of launch on Monday, the Mosi oa Tunya coin was priced at $1,824.

Internationally, gold coins are used in countries like China, South Africa and Australia as an inflation hedge and as an investment opportunity, although they are not used as widely as currency as envisaged by Zimbabwe’s central bank, Chitambara said.

“For Zimbabwe, we are in chronic hyperinflation, so expect strong adoption of these gold coins,” he said. However, most Zimbabweans struggle with day-to-day survival and will not be able to buy them, he said.

“For the common man, there’s not really much that could benefit directly from this, especially if you don’t have excess cash,” Chitambara said.

“A lot of people don’t have money for bread, let alone savings,” he said. “The expectation is that it will indirectly benefit the common man by moderating prices.”

Businesses with excess cash may find the coins useful as a store of value and also as an alternative investment asset, although individuals and businesses will likely continue to prefer the dollar because “it’s convenient and highly liquid,” he said.

Selling the coins in rapidly depreciating local currency could also lead to “rent-seeking behavior, speculation and arbitrage within the economy,” as some might buy in local currency and later sell in dollars, he said.

The fact that Zimbabwe’s central bank would have to buy the gold from miners of the metal, such as informal artisanal miners, could also pose challenges and lead to increased smuggling, analysts say.

“Zimbabwe’s gold supplies have recovered significantly on the back of appetizing US dollar payments being offered to artisanal miners,” securities firm Morgan & Co noted in a market research report.

“However, should there be a discrepancy between the amount of US dollars used to buy the gold from miners and the US dollars used to pay for the coins, it could put pressure on the foreign exchange reserves of the central bank and its intermediaries put. If this impacts artisanal gold miners, it could result in low shipments to Fidelity Printers and increase gold smuggling activity,” the Morgan report said. Fidelity Printers, a subsidiary of the central bank, is the country’s only authorized gold buyer.

Zimbabwe has significant gold deposits and exports of the precious metal and is one of the South African country’s most important foreign exchange earners. Gold production improved to about 30 tons in 2021, according to official figures, compared to 19 tons in 2020. Small producers such as poorly regulated miners contributed 19 tons of gold shipped in 2021, according to official figures.

Gold smuggling was widespread. It is estimated that the country loses about $100 million worth of gold every month to smuggling, Interior Minister Kazembe Kazembe said. Smuggling costs the country about 36 tons of gold annually, according to a report released this month by the Center for Natural Resource Governance, a local natural resource watchdog. Legally, all gold mined in Zimbabwe is supposed to be sold to the central bank, but many producers prefer to smuggle the gold out of the country to be paid in US dollars.


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Virginia C. Taylor