Published on 25 Jul 2022

Zimbabwe introduces gold coins to stem inflation

Measure aimed at shoring up confidence in the economy and stop the hoarding of US dollar

The Reserve Bank of Zimbabwe (RBZ) central bank of Zimbabwe has begun selling gold coins to stem inflation and dampen the demand for US dollar. The one-troy-ounce, 22-carrat coin called “Mosi oa-Tunya Gold Coin” – a reference to the original local name of Victoria Falls is slated to start circulating as fiat currency from July. The coins can be traded freely, converted to cash, used for transactions, and act as security for loans. Individuals and institutional buyers of Reserve Bank of Zimbabwe (RBZ’s) gold coins will be required to hold them for at least 180 days before selling while exporters earning less than a million U.S. dollars will be allowed to use the surrender portion of their receipts to purchase the coins in foreign currency. The coins will be available in local currency, U.S. dollars and other foreign currencies at a price based on the prevailing international price of gold and the cost of production. The London Bullion Market Association price, a renowned global market for gold, will be the benchmark on which the 5 percent margin cost cover will be added.

The gold coins are a means to stem hyper-inflation, slow the weakening of the local currency, and address an acute foreign exchange shortage. Inflation for June reached 191 percent on an annualised basis – up from 131.7 percent recorded in May. At the same time, the Zimbabwean dollar has lost more than 40% of its value against the US dollar in 2022 and foreign reserves are set to decline to less than one month of import cover in 2022. The RBZ’s conventional monetary policy interventions are clearly not working. Even an interest rate hike of 12,000 basis points earlier in July – to 200% – has failed to notably stem inflation. The gold coin project is an apparent effort at novel intervention. It follows a decision to make US dollar legal tender for the next five years.

Resorting to gold is, of course, not a new hedge against inflation. Amid global uncertainty stemming initially from the coronavirus pandemic and more lately the conflict in Ukraine, the demand for gold has soared as the commodity became attractive to investors seeking a safe haven. The price per ounce of gold rose from less than US$1,200 prior to the onset of the pandemic, to over US$2,000 at times in 2020 and 2022; it is currently trading at around US$1,700.

In bringing a gold coin to market, Zimbabwe will join the likes of South African (Krugerrand), Australia (Australian Kangaroo) and the United States (American Eagle). Zimbabwe’s gold output jumped over 85% in the first five months of 2022 – up to 13 tonnes from 7 tonnes in the corresponding period last year. Fidelity Printers and Refiners (FPR) – the central bank-owned sole buyer, refiner, and exporter of gold in Zimbabwe – is aiming to produce 40 tonnes of gold in 2022.

So, on paper at least, the gold coin issue makes sense – and those touting the potential of the Zimbabwean economy have been at pains to promote the benefits it could have for investor confidence. Foreign firms that need to repatriate earnings have welcomed the move. They see introduction of gold coins as a stable  source of value unlike the Zimbabwean dollar. Private enterprises have been constrained by foreign exchange shortages and stiff forex regulations that make it difficult for traders to access foreign currency.

At the same time, the country’s main import customers will welcome the potential improvement to – and stability of – foreign exchange reserves that the coins may manifest. Among these countries is Singapore, which is said to account for 10% of Zimbabwe’s imports – which is mostly in the form of refined petroleum.

However, all that glitters in not gold. Zimbabwe’s economy is riddled by structural vulnerabilities, not least of which is, in fact, inconsistent policy initiatives (as recently as 20 July, the RBZ reportedly stated that gold coins will have to be held for 180 days before selling). Other vulnerabilities include extensive public sector corruption; political involvement in key sectors; distortions in foreign exchange markets; and susceptibility to environmental shocks.

With prevailing negative sentiment towards the government’s economic management, there is little to suggest widespread adoption of the gold coin initiative, despite its well intention and reasoned motivations. It certainly will not be the panacea to Zimbabwe’s economic ills.



Zimbabwe Sells Gold Coins to Ease US Dollar in High Demand’, Bloomberg, 07 July 2022

Inflation is so bad in Zimbabwe that the country is now issuing gold coins to its citizens’, Fortune, 06 July 2022

Zimbabwe’s gold coins available from July 25’, IOL, 17 July 2022

Zimbabwe gold output jumps 86,3%’, Bulawayo24, 08 June 2022

Zimbabwe – Unreserved banking’, Signal Risk, 28 June 2022

Foreign trade figures of Zimbabwe’, Lloyd’s Bank, April 2022

What does Zimbabwe import from Singapore?’, OEC, 2020

Gold coins to be held for at least 180 days’, The Herald, 20 July 2022

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