Zimbabwe will start selling gold coins this month as a way to tame inflation that has weakened the local currency, the country’s central bank said.
The governor of the central bank, John Mangudya, noted that the coins, known as Mosi-oa-Tunya, 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, according to The Citizen.
Mangudya said the introduction of the gold coins would reduce pressure on the U.S. dollar in the open market, which the government has said is responsible for the depreciation of the currency.
“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.”
He further stressed that investors “that purchase gold coins will be able to preserve value and make good profits when gold prices rise,” adding that the coins will contain one “troy ounce of gold and would be sold through normal banking channels.”
Even before the gold coins become available for sale, the country’s finance minister has said the move will not solve the country’s high inflation and structural challenges.
“Instead it is another gimmick of extraction and arbitrage. They never tire from ways of transferring wealth from the poor,” Tendai Biti said. He led the Treasury when Zimbabwe dollarised at the height of hyperinflation in 2009, according to The Citizen.
He continued: “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.”
Biti also noted that selling gold in local currency allows cartels with billions in Zimbabwe dollars to hedge the same with gold the same way they have been buying the U.S. dollars on the black market.
“It also allows some foreign crooks to launder their money in Zimbabwe through gold coins,” he said.
Zimbabwe’s currency crisis has seen the annual inflation rate jump to 192 percent in June. There has also been a sharp depreciation in the Zimbabwean dollar, which analysts say lost over two-thirds of its value against the dollar this year.