The Reserve Bank of Zimbabwe recently revealed that some 25,188 of its value-preserving gold coins were sold between July 2022 and January 13. According to central bank governor John Mangudya, gold coins “have proven to be an effective open market instrument”. to mop up excess liquidity in the economy.
Gold coins as an alternative value preservation tool
According to Zimbabwe’s central bank, around 25,188 “Mosi-oa-Tunya” gold coins worth over $28 million ($20 billion ZWD) were sold between July 2022 – when the coins were sold. were initially introduced – and on 13 January. Of this total, acquisitions by so-called businesses accounted for 84% “while purchases by individuals accounted for 16%”.
Originally launched to act as “an alternative retail investment product for value preservation”, for the wealthy, the bank said the low denomination gold coins introduced in November 2022 “accounted for 38% of all the sales”.
Commenting on the impact of gold coins since their introduction, Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya said:
Coins have proven to be an effective open market instrument to mop up excess liquidity in the economy and a retail investment product to preserve the value of investable funds.
The RBZ governor added that the coins, which have a vesting period of 180 days, along with the bank’s high interest rate policy, have played a role in stabilizing inflation and the rate local currency exchange rate against the greenback.
The fall in inflation in Zimbabwe
According to the local statistics office, Zimstats, the Southern African country’s monthly inflation fell from a peak of 30.74% in June 2022 to 1.1% in January 2023. Despite this slowdown, the latest rate of Zimbabwe’s annual inflation of 230% remains one of the highest in the world.
Regarding the exchange rate of the Zimbabwean dollar against the US dollar, the latest data from the RBZ suggests that the parallel market premium has fallen from a high of almost 100% on July 1, 2022 to well below 50% on the 19 December 2022. As the data shows, the auction market exchange rate of the local currency, which stood at just over 100 ZWL to 1 USD on January 11, 2022, closed the year at around 700 ZWL for $1. According to RBZ data, the parallel market exchange rate of the local currency on December 19 was around 900:1.
Meanwhile, in his 2023 monetary policy statement, RBZ Governor Mangudya said the bank “will continue to use gold coins based on demand as it seeks to promote a culture of ‘saving”.
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