Zimbabwe is set to introduce a gold-backed digital currency in an effort to stabilize its local unit, which has been facing continued depreciation against the US dollar, according to central bank governor John Mangudya as reported by state-run Sunday Mail.
The digital tokens will allow those holding small amounts of Zimbabwe dollars to exchange their money for a more stable form of currency that is backed by gold, providing a means to store value and hedge against currency volatility.
Mangudya stated that the introduction of these tokens will ensure that even those with low amounts of currency can access gold units, aiming to include everyone in the country’s financial system. This move follows last year’s introduction of gold coins as an attempt to mop up excess liquidity and stabilize the local unit. Officially, the local currency trades at Z$1,000.4 against the US dollar, but street rates in the capital, Harare, are as high as Z$1,750.
Mangudya attributed the current exchange rate volatility to expectations of increased foreign currency supply in the market during the tobacco auction season, which started in March. However, the country’s tobacco exports have decreased compared to the same period last year, with 54.9 kilograms of tobacco valued at $307 million exported so far, compared to 57 million kilograms valued at $295.5 million during the same period in the previous year.
Zimbabwe had abandoned its currency in 2009 due to hyperinflation, and had adopted the US dollar as the main form of currency. The Zimbabwe dollar was reintroduced in 2019 in an attempt to revive the struggling economy, but the government decided to make the US dollar legal tender again in June to combat rising prices. The introduction of a gold-backed digital currency is seen as another step towards stabilizing the country’s currency and addressing its economic challenges.
