Zimbabwe’s central bank governor, John Mangudya, has announced that the country will soon introduce a gold-backed digital currency to stabilize the local unit from its continued depreciation against the dollar, according to a report by the state-run Sunday Mail.
The new digital tokens will allow those holding small amounts of Zimbabwean dollars to exchange their money for a more stable asset and hedge against currency volatility. The tokens will enable those with low amounts of currency to purchase gold units, ensuring that everyone can participate in this new system.
The introduction of gold coins last year was an attempt to stabilize the local unit and mop up excess liquidity. Currently, the official exchange rate is Z$1,000.4 against the dollar, but on the streets of the capital, it trades at Z$1,750.
Mangudya said that the current exchange rate volatility is due to expectations of increased foreign currency supply in the market during the tobacco auction season, which started in March. Since the start of the auction season, Zimbabwe has exported 54.9 kilograms of tobacco valued at $307 million. During the same period last year, it had shipped 57 million kilograms valued at $295.5 million.
The introduction of the gold-backed digital currency is expected to ensure that those with low amounts of currency can buy the gold units “so that we leave no one and no place behind,” Mangudya told the Sunday Mail.
Zimbabwe abandoned its currency in 2009 after an episode of hyperinflation rendered the local money worthless. The Zimbabwe dollar was reintroduced in 2019 to revive the stagnating economy, but the government made the US dollar legal tender again in June to try and tame rampant price increases.
The new digital currency is expected to be another step towards stabilizing the local unit and restoring the economy of the southern African country.