KEY POINTS
- The Reserve Bank of Zimbabwe (RBZ) will launch a digital currency backed by gold that will be accepted as legal tender for transactions in the country.
- The digital currency is part of the measures to stabilize the failing local currency and stop it from further depreciating against the US dollar.
- Zimbabweans believe that the digital currency is another scheme for gold smuggling, especially after the revelations of the Aljezeera documentary called the Gold Mafia.
The Reserve Bank of Zimbabwe (RBZ) is set to launch a digital currency backed by gold stored at the institution. The digital currency will be accepted as legal tender for all transactions and has been introduced as part of the measures to stabilize the failing local currency and stop it from further depreciating against the US dollar.
According to John Mangudya, the RBZ governor, those who possess small amounts of Zimbabwean dollars will be able to exchange their cash for digital gold tokens in order to store value and protect against exchange rate volatility. He stated, "So that we leave no one and no place behind."
According to Mangudya, the market's present exchange rate volatility is a result of assumptions that when the tobacco auction season began in March, there would be an increase in the availability of foreign currency. Zimbabwe has shipped 54.9 kg of tobacco worth $307 million since the auction season began. It handled 57 million kg of cargo valued at $295.5 million during the same time period last year.
According to Mangudya, the parallel market exchange rate is anticipated to start stabilizing this week when tobacco farmers start getting their share of US dollar payments. He stated that "since the tobacco marketing season began, the majority of the proceeds have been used to fulfill the commitments of tobacco contractors.
The southern African nation also launched gold coins last year in an effort to absorb surplus liquidity and support the domestic currency. Although the local currency is officially valued at Z$1,000.4 per US dollar, on the streets of the city, it is commonly exchanged for Z$1,750. This new development happens as the RBZ considers adding more Mosi-oa-Tunya gold coins to the market in an effort to stop the current erosion of the Zimbabwe dollar on the black market.
A growing number of central banks worldwide are beginning to create their own digital currencies, a development designed to increase financial inclusion, reduce transaction costs, and make money more intelligent.
Russia is currently collaborating with its allies, such as Iran and China, to build clearing platforms for cross-border settlements in digital currencies backed by gold in order to replace transactions in fiat currencies like the US dollar and the euro.
After a period of hyperinflation rendered the local currency useless in 2009, Zimbabwe abandoned its currency and replaced it mostly with the US dollar. The Zimbabwe dollar was reinstated in 2019 in an effort to revitalize the faltering economy, but in June last year, the government decided to declare the dollar legal tender once more in an effort to reign in rife price hikes.
As the Southern African country gears up for elections, the ZANU-PF-led government is trying to stabilize the economy. However, many of these efforts have not yielded much, and life is becoming more difficult for ordinary Zimbabweans. Last year, many anticipated a positive change after the introduction of gold coins. However, the coins haven’t changed anything.
Observers have also argued that the creation of gold coins by the RBZ is a scheme by corrupt ZANU-FF politicians to loot Zimbabwean gold and launder money. These accusations are not far-fetched, especially with the recent revelations of the explosive Aljezeera documentary called The Gold Mafia, in which RBZ and its officials have been implicated.