Zimbabwe to sell gold coins as local currency weakens

Zimbabwe will this month start selling gold coins as a store of value at a time its currency is weakening considerably, pushing the cost of living beyond the reach of many.

Central bank governor John Mangudya said the coins would be available for sale from July 25 in local currency and United States dollar at a price based on the prevailing price of gold.

The gold coins known as Mosi-oa-Tunya are named after Victoria Falls and can be converted into cash and sold locally and internationally.

Dr Mangudya said the gold coins would reduce pressure on the US dollar in the open market, which the authorities blame for the depreciation of the Zimbabwe dollar.

“As you are aware, the US dollar has largely been used for two things; for the importation of goods and store of value,” he said.

“The gold coins will provide an alternative investment option to the US dollar as a store of value.”

The central bank boss said investors that purchase gold coins will be able to preserve value and make good profits when gold prices rise. He said the coins will contain one troy ounce of gold and would be sold through normal banking channels.

'Gimmick of extraction'

However, Finance minister Tendai Biti said the gold coin will “not solve the structural crises arising from the exchange rate collapse, excess money, inflation and unemployment” characterising Zimbabwe’s economy.

“Instead it is another gimmick of extraction and arbitrage.

“They never tire from ways of transferring wealth from the poor,” charged Mr Biti, who led the Treasury when Zimbabwe dollarised at the height of hyperinflation in 2009.

“The Zimbabwe dollar is in tatters due to, among other things, the lack of reserves and the absence of anything to back it up.

“There is, therefore, no sense in selling gold when it can’t be used to back up the tattered currency.

“Selling gold, particularly in local currency, allows cartels with billions in Zimbabwe dollars to hedge the same with gold the same way they have been buying the US dollars on the black market.

“It also allows some foreign crooks to launder their money in Zimbabwe through gold coins.”

Zimbabwe last week more than doubled interest rates to 200 percent from 80 percent and announced plans to make the US dollar legal tender for the next five years to restore confidence in the economy.

Soaring inflation in the southern African country has raised the cost of living sharply with the Zimbabwe National Statistics Agency saying annual inflation rose to 191.7 percent in June compared to 131.7 percent recorded in May.

The local currency, which was reintroduced in 2019 after a decade of dollarisation, has been losing value rapidly against the US dollar, leading to unrest among the country’s labour force as workers demand to be paid in foreign currency.