The Reserve Bank of Zimbabwe (RBZ) says it will continue to mint more gold coins provided there is demand from the market, following the bullion coins’ positive contribution to efforts aimed at taming inflation and stabilising the exchange rate.
This is despite reservations by the International Monetary Fund about the use of gold coins to deal with liquidity and exchange rate issues, albeit in the form of an alternative investment instrument.
“The bank will continue to avail gold coins on a demand-driven basis as it seeks to promote a savings culture and provide alternative investment instruments to the public in the dual currency system,” said Dr John Mangudya, the RBZ Governor in the monetary policy statement on Thursday.
The RBZ has sold a total of 25 188 gold coins worth $20 billion as at January 13, 2023.
The central bank first introduced the Mosi-oa-Tunya gold coins in July 2022 as an alternative investment option while also helping to tame inflation driven by the negative effect of excess liquidity on the parallel market exchange rate.
Analysts, however, say the introduction of smaller gold coins has helped the country’s economy to grow as the Government’s measures to stabilise the economy will drive productive sector activity.
Economist Gladys Shumbambiri said in the face of growing instability, gold coins were a viable alternative to restore the value of local currency.
“The timing of the issuance of these smaller denominations was important as it coincided with increased local currency liquidity from bonus payments. This also addressed the concern that the product was designed for the elite,” Shumbambiri said.
Another economist Evelyn Chifamba said: “Zimbabwe is an underrated leader in this transformational change. Gold provides an alternative store of value to reserve currencies such as the United States dollar which have been volatile of late.”
Banker Raymond Ncube said the gold coins have been effective in stabilising the exchange market.
“If you think about the circulation of $20 billion in the economy, it has a multiplier effect. The gold coins, therefore, immunised or sterilised that money. That, therefore, stabilised the exchange rate in addition to other initiatives by the Government including the value for money initiative,” Mr Ncube said.
According to the central bank, 84 percent of the gold coins were acquired by corporates while individuals bought 16 percent of the total issued.
In November 2022, the bank went on to introduce smaller gold coin denominations to satisfy the needs of clientele with lesser savings.
As a result, the smaller denominations accounted for 38 percent of total gold coin sales as of January 13, 2023.
Zimbabwe took the unprecedented step of introducing gold coins as an alternative investment option after inflation spiked from 191 percent in June to 257 percent in July this year.
The gold coins are minted by the RBZ-owned Fidelity Printers, the sole buyer of gold in the country. Their price is determined by the international market rate for an ounce of gold, plus five per cent for the cost of producing the coin.
The gold coins were introduced on July 25, 2022 as part of several policy measures to ease demand for the greenback, stabilise the Zimbabwe dollar exchange rate and tame resurgent inflation.
The gold coins have a vesting period of 180 days after which the Bank can buy them back from the investors.