The Reserve Bank Of Zimbabwe has recently announced that 25,188 units of its gold cash have been issued between July 2022 and January 13. According to the governor of the central bank, John Mangudya, these coins have proven to be a successful open market instrument for absorbing additional liquidity in the economy.
Gold Coins Are an Efficient Alternative Value Preservation Tool
According to Zimbabwe’s Central Bank, between 2008 and 2009, gold coins worth more than $28 million (ZWD$20 billion) were issued. July 2022 saw the initial gold coins launch, with January seeing the most recent sales. Of this total, the so-called purchases of companies, accounted for 84%, while acquisitions by individuals represented 16%.
The gold coins were initially designed as “an alternative value-preserving retail investment product” with the central bank suggesting that the affluent could use lower-denomination gold coins. These were launched in November 2022 and accounted for 38% of all sales.
Commenting on how gold coins have influenced the economy since their introduction, the Reserve Bank of Zimbabwe’s (RBZ) Governor John Mangudya said:
They have been established to be an effective open market instrument to absorb the greater liquidity in the economy, and a retail financing product for preserving the value of investable funds.
The RBZ governor stated that currencies with a consolidation period of 180 days and the bank’s high interest rate policy helped to stabilize inflation and the exchange rate of the local currency against the US dollar.
Zimbabwe’s Falling Inflation
Zimbabwe’s southern nation experienced month-to-month inflation, which, according to the local statistical office Zimstats, declined from a peak of 30.74% in June 2022 to 1.1% in January 2023. Despite this slowdown, the country still has the highest annual inflation rate at 230%.
Regarding the exchange rate of the Zimbabwean dollar against the US dollar, according to the RBZ, the US parallel market premium has fallen from an excess of around 100% on July 1, 2022 to below 50% on December 19, 2022. The public auction market exchange rate of the local currency on January 11, 2022 was ZWL100 to USD1 and ended the year at ZWL700 to USD1. According to RBZ information, the parallel market exchange rate for the local currency on December 19 stood at approximately 900.
In his 2023 fiscal policy statement, RBZ Governor Mangudya stated that the bank “will continue to use gold coins based on demand as it seeks to promote a culture of thrift.”
What are your thoughts on this story? Please let us know in the comments section below.
