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The Zimbabwean government has announced that it will issue gold coins in July. This has been skeptical by many local currency traders.
The Reserve Bank of Zimbabwe said on July 4 that a gold coin called “Mosi-Oa-Tunya” weighs 1 troy ounce and has a purity of 22 carats. press release.. All coins have a serial number and can be used as collateral for loans and credit facilities.
Starting July 25, the coins will be generally sold in local Zimbabwe dollars (ZWD), US dollars (USD), and other foreign currencies at prices based on production costs and the general international price of gold.
“Coins are sold through the Bank and its subsidiaries, Fidelity Gold Refinery (Private) Limited and Aurex (Private) Limited, local banks, and selected international banking partners. The entity that sells coins is Know. You need to apply the principles of Your Customer (KYC). “
Coins are given a “predetermined asset status” that institutional investors can use to meet the regulatory requirements for a given asset investment.
Talk to ParentsForeign currency trader Munez Mandy Opera called the government’s decision a “failed move.” He pointed out that gold is expensive. He added that many Zimbabwean citizens could not buy coins and would continue to keep their money at home.
“I can’t believe it will give me coins while the central bank holds my cash,” said another foreign currency trader, Evans Mupachikwa. “Zimbabwe is known for policy discrepancies. What if they wake up and say they can’t trade coins anymore?”
Local currency and inflation
Zimbabwe dollar (ZWD) was introduced in 1980 and traded equivalent to the US dollar. By 2000, Zimbabwe dollars were trading 100: 1 against the US dollar. In September 2009, US $ 1 was worth 300 trillion ZWD, forcing us to abandon the inflation-torn local currency and adopt US and other foreign currencies.
In 2019, the government reintroduced the Zimbabwe dollar, but the currency rapidly lost its value. Zimbabwe dollars have so far lost more than two-thirds of their value against the US dollar in 2022.
Inflation in Zimbabwe reached 191.6% in June. In response, the central bank has raised its main interest rate from 80% to 200% annually to address rising living costs. Zimbabwe also outlined plans to make the US dollar a fiat currency for five years to increase confidence.
According to IH Securities, a Zimbabwean Harare-based brokerage firm, selling gold coins can increase investor confidence in Zimbabwe dollars. “This will distinguish the gold coin market from the government’s paper market and money market,” the company said in an email to its customers. Bloomberg..
In addition, securities firms added that central banks could “raise to a significant level” the excess liquidity of Zimbabwe dollars by selling gold coins.
Reuters contributed to this report.
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Naveen Athrappully is a news reporter on business and global events in The Epoch Times.
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