Zimbabwe is set to introduce a gold-backed digital currency to the public from May 8, according to the country’s central bank governor, John Mangudya. The move comes as the country continues to battle economic instability and look for an alternative to the US dollar.
This year alone, Zimbabwe’s local currency has fallen by 35% against the US dollar, leading the central bank to look for new ways to stabilize the economy.
The gold-backed digital tokens will be sold through banks in both local and foreign currencies at a 20% margin above the interbank mid-rate. The currency will be introduced in two phases, starting with investment purposes and then moving on to transactions.
Mangudya said the new currency was intended to “expand the value-preserving instruments available in the economy and enhance the divisibility of the investment instruments and widen their access and usage by the public.”
The central bank has been acquiring precious minerals since 2022, following the introduction of a policy that requires miners to pay part of their royalties in cash and metal.
The digital currency plan was approved by Zimbabwe’s monetary policy committee in March, eight months after the country introduced gold coins as a store of value to support the local currency.
Zimbabwe’s move to launch a gold-backed digital currency follows Nigeria’s introduction of a digital currency in 2021, making Nigeria the first country in Africa to adopt a digital currency.
Persistence Gwanyanya, a member of the central bank’s monetary policy committee, noted that the bank will require about $100 million worth of gold for the project. The issuance of the gold-backed digital tokens aims to stabilize Zimbabwe’s currency and provide an alternative to the US dollar for transactions.
In 2009, the government substituted the practically worthless Zimbabwean dollar, valued then at Z$2,621,984,228,675,650,147,435,579,309,984,228 (Z$2.6 decillions) to $1 USD, with the US dollar, leading to a decrease in inflation.
In 2018, the Zimbabwean government reintroduced the Zimbabwean dollar, which quickly lost relevance as citizens hoarded US dollars.
The government allowed the use of foreign currency for domestic purchases after the COVID-19 pandemic in 2020, leading to the dual currency system. However, the Zimbabwean dollar remained unstable.