Gold Coins Aid Zimbabwe's "Price and Exchange Rate Stability": Report
February 10, 2023 7:55 AM
Recent data from the Reserve Bank of Zimbabwe indicates that between July 2022 and January 13, 2019, a total of 25,188 of the country's value-preserving gold coins were purchased. The governor of the central bank, John Mangudya, said that the gold coins "had proved to be an effective open market instrument for mopping up surplus liquidity in the economy."
It was reported by the Zimbabwean central bank that from July 2022 (when the coins were first released) and January 13 (when sales ended), a total of 25,188 "Mosi-oa-Tunya" gold coins were sold, with a combined face value of over $28 million (ZWD$20 billion). So-called corporations bought 84% of this, while people bought 16%.
The bank reported that smaller denomination gold coins announced in November 2022 "accounted for 38% of total sales." The coins were initially released as a "alternative retail investment product for value preservation" for the rich.
John Mangudya, governor of Zimbabwe's Reserve Bank (RBZ), recently commented on the effects of the country's new gold coins.
"The coins have shown promise as both a retail investment product and an open market device for absorbing economic surplus liquidity."
The RBZ governor said the coins, which have a 180-day vesting time, helped stabilize inflation and the local currency's exchange rate against the dollar, in addition to the bank's high-interest rate strategy.
Monthly inflation in the southern African country of Zimstats dropped from a peak of 30.74% in June 2022 to 1.1% in January 2023. However, even with this decrease, Zimbabwe's latest annual inflation rate of 230% is quite high.
According to the most recent RBZ data, the parallel market premium for the Zimbabwean dollar against the U.S. dollar fell from approximately 100% on July 1, 2022 to well under 50% by December 19, 2022. The figures show that by the end of 2022, the auction market exchange rate for the local currency had increased to almost ZWL700:USD1 from its opening rate of slightly over ZWL100:USD1. The RBZ figures show that on December 19 the local currency's exchange rate on the parallel market was around 900:1.
At the same time, in his 2023 monetary policy statement, RBZ governor Mangudya noted that the bank "would continue to offer gold coins on a demand-driven basis as it aims to foster a savings culture."