Zimbabwe’s central bank announced this month that the country will begin selling gold coins as a means of controlling inflation, which has undermined the local currency.
According to The Citizen, the central bank’s governor, John Mangudya, announced that the coins, known as Mosi-oa-Tunya, would go on sale starting on July 25 in both local money and US dollars for a price based on the current price of gold.
The administration has stated that pressure on the U.S. dollar in the open market is to blame for the currency’s decline, but Mangudya said that the introduction of the gold coins would ease that pressure.
As you are aware, the US dollar has primarily been utilized for two purposes: as a store of value and for the importation of products, he stated. The gold coins will offer an alternative to the US dollar as a store of value in the investment market.
He added that the coins would contain one troy ounce of gold and be sold through conventional banking channels, emphasizing that investors “who purchase gold coins would be able to conserve value and make good gains as gold prices rise.”
The country’s finance minister has already stated that the measure won’t address the nation’s high inflation and structural problems. This is before the gold coins are even put up for sale.
“Instead, it’s just another extraction and arbitrage gimmick. They never get tired of finding new ways to steal money from the needy, Tendai Biti said. According to The Citizen, he oversaw the Treasury when Zimbabwe dollarized in 2009, during the height of hyperinflation.
“The Zimbabwe dollar is in tatters because, among other things, there are no reserves and nothing to back it up,” he continued. Therefore, it makes no sense to sell gold if it cannot be used to support the crumbling currency.
In addition, Biti pointed out that by selling gold in local currency, cartels with large sums of Zimbabwean dollars can hedge those sums with gold, just as they have been doing with dollars they have purchased on the criminal market.
Additionally, he added, “it enables certain overseas criminals to use gold coins in Zimbabwe as a form of money laundering.”
Due to Zimbabwe’s currency problem, the annual inflation rate increased to 194% in June. The Zimbabwean dollar has also declined significantly; according to economists, it has lost nearly two-thirds of its value against the dollar this year.