What to do when inflation soars to triple digits? The African nation of Zimbabwe believes gold coins are the answer.
Zimbabwe has introduced its own gold coin which can be used as legal tender with the hope that by attracting local buyers it will reduce demand for U.S. dollars, and, eventually slow inflation.
Inflation in Zimbabwe in June jumped to an annual rate of 191 percent.
After abandoning its currency in 2009 due to hyperinflation, and relying entirely on foreign currencies, especially the U.S. dollar, Zimbabwe reintroduced its own dollar in 2019. But it has been rapidly losing value as prices soar and citizens stash savings in the U.S. dollar.
“We are now providing that store of value to ensure that people do not run to the parallel market in search for foreign currency to store value,” said John Mangudya, governor of the central bank, the Reserve Bank of Zimbabwe. “And there is no other better product that can be used to store value other than gold.”
The gold coin is called Mosi-oa-Tunya, which translates to “the smoke that thunders,” a reference to Victoria Falls, displayed on the obverse side of the coin. Victoria Falls is located on the border between Zimbabwe and Zambia.
Mosi-oa-Tunya one troy ounce coins can be converted to cash after being held for 180 days.
A major challenge to the country’s plan is the fact that most Zimbabweans cannot afford to purchase the new coin, which sells for the price of an ounce of gold plus five percent for production costs, though Zimbabwe has plans to produce smaller denominations of the gold coin.