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Zimbabwe is reintroducing physical gold coins to stabilize its struggling currency following the limited success of its gold-backed digital token initiative. The Reserve Bank of Zimbabwe (RBZ) aims to leverage the growing appeal of gold amid global economic uncertainty, betting that tangible bullion will resonate more effectively with the public.
The Revival of Gold Coins
Named “Mosi-Oa-Tunya” after Victoria Falls, these physical gold coins are being reintroduced after minting was paused in July 2024. Reserve Bank Governor John Mushayavanhu had previously shifted the focus toward digital alternatives, but recent global economic trends have prompted a change in strategy.
According to Persistence Gwanyanya, a member of the central bank’s monetary policy committee, the surge in gold prices globally presents an opportune moment for this initiative. Gwanyanya emphasized the role of gold in preserving value for investors:
“Gold is more attractive to the market at the moment and it supports our value preservation efforts. We are taking advantage of firm gold prices and re-injecting the gold coins into the market.”
Two major financial institutions, the Central Africa Building Society and Nedbank Zimbabwe, have already begun selling these gold coins as an alternative investment option. Available in denominations ranging from one-tenth of an ounce to a full ounce, the coins offer flexibility for buyers looking to diversify their portfolios without committing large sums of money.
Challenges with Digital Gold Tokens
Zimbabwe’s earlier attempt to stabilize its economy through gold-backed digital tokens, introduced in April 2023, faced significant hurdles. The tokens, initially named ZiG and later renamed Gold-Backed Digital Tokens (GBDT), were designed to provide a secure and inflation-resistant payment method. However, public adoption was slow, largely due to lingering mistrust of new monetary schemes.
Despite early interest, with 135 applications valued at 14 billion Zimbabwe dollars (around $12 million) submitted during the first round of token sales, enthusiasm waned quickly. By June 2023, only 35 new applications were reported, underscoring public skepticism. Many Zimbabweans continued to favor the U.S. dollar for its reliability, further undermining the success of the digital initiative.
The International Monetary Fund (IMF) had also expressed concerns about the project, advising Zimbabwe to liberalize its exchange rate rather than experiment with alternative currencies backed by gold reserves. The IMF warned that using national gold reserves to support these tokens could deplete valuable assets without guaranteeing long-term stability.
Physical Gold Coins: A Safer Bet?
The renewed focus on physical gold coins comes amid a 25% surge in global bullion prices this year, driven by rising economic uncertainty and geopolitical tensions. Gold remains one of Zimbabwe’s largest exports, with revenue from shipments jumping to $396 million in Q1 2024, up from $303.1 million in the same period last year.
While gold coins may offer a more tangible and reassuring investment option for Zimbabweans, the country’s history with monetary experiments is fraught with challenges. The Zimbabwean dollar, for instance, was scrapped in 2009 due to hyperinflation and reintroduced a decade later with mixed results.
These gold coins represent a return to traditional financial tools in a world increasingly dominated by digital innovations. While nations like Nigeria are exploring central bank digital currencies such as the eNaira, Zimbabwe appears to be relying on physical assets to restore confidence in its monetary system.
Looking Ahead
As Zimbabwe grapples with ongoing economic instability, the success of its revived gold coin initiative remains uncertain. Whether this move will prove effective in stabilizing the currency and preserving value for investors is yet to be seen, but it underscores the country’s willingness to explore diverse strategies to address its financial challenges.
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