The government of President Emmerson Mnangagwa is fighting back inflation with a novel strategy: gold coins.
Starting Monday, Zimbabwe is selling one-ounce, 22-carat gold coins bearing an image of Victoria Falls, its world-famous natural wonder. Each has a serial number, comes with a certificate, and will be sold at a price “based on the prevailing international price of gold and the cost of production,” the central bank said in its announcement on July 4.
The coins will be tradable both in Zimbabwe and overseas, the bank said, and can be exchanged for cash. The goal is to reduce the quantity of Zimbabwe dollars in circulation to eventually restore its value.
What’s unknown is whether the approach has any real chance of success.
While gold is traditionally the ideal hedge against inflation and general economic uncertainty, no country has previously tried to tackle a weakening currency by selling gold coins. “In that sense, it is unusual,” said Carlos Caceres, the International Monetary Fund’s representative to Zimbabwe.
And with gold trading at $1,710 per troy ounce late last week, institutional investors may be the coins’ principal buyers.
“No ordinary person will be able to afford it,” said Prosper Chitambara, a senior researcher at the Labour and Economic Development Research Institute of Zimbabwe. “Right now, Zimbabweans are living hand-to-mouth.”
Economic crises are nothing new to people in the southern African nation, who for more than two decades have faced hyperinflation, food and fuel shortages, staggering unemployment, and other hardships.
Most of Zimbabwe’s inflationary pressures emanate from its currency troubles. But rising prices are also being fuelled by Russia’s invasion of Ukraine, which has sparked a global wave of inflation amid supply shortages of grains and fuel.
On the streets of the capital city of Harare, there isn’t much chatter about the new coin — the Mosi-ao-tunya, the traditional name for the Zambezi River waterfall. It translates to “the smoke that thunders.”
Author: Staff Writer