• Tue. Jul 16th, 2024

RBZ to mint more gold coins if necessary

ByEconomic Times

Feb 6, 2023

By ETimes

The Reserve Bank of Zimbabwe (RBZ) says it will not hesitate to mint more gold coins if the market demands them, defying the International Monetary Fund suggestions.
“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 today.
According to the RBZ, it sold a total of 25 188 gold coins worth $20 billion as at 13 January 2023.
This is roughly six months after the apex bank in July 2022 introduced gold coins as a formal means of saving and taming the runaway inflation rate experienced mainly on the parallel market.
Analysts, however, say the introduction of smaller gold coins assisted the country’s economy to grow as government needs to support the local currency as it will aid the productive sector to achieve economic growth.
Economist Gladys Shumbambiri said in the face of increased 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 were effective in stabilising the exchange market.
“If you think about the circulation of $20 billion in the economy, it has a multiplying 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,” Ncube said.
According to the central bank, 84 percent of the gold coins were acquired by corporates while individuals just accounted for 16 percent in the period.
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 13 January 2023.
The country took the unprecedented step of introducing gold coins as legal tender 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 – Harare

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