According to the state-run outlet, The Sunday Mail, the initiative will allow small amounts of Zimbabwean dollars to be swapped for the digital gold token, allowing more Zimbabweans to hedge against currency volatility. According to Reserve Bank of Zimbabwe Governor John Mangudya, the objective is to “leave no one and no place behind.” Last year, the government also issued gold coins in an attempt to absorb surplus liquidity and stabilise the local currency.
Mangudya said the current exchange rate volatility can be attributed to market anticipation of higher foreign currency supply when the tobacco auction season began in March. Zimbabwe has shipped 54.9 kilos of tobacco for $307 million since the auction season began. It shipped 57 million kilos for $295.5 million over the same period last year.
According to Bloomberg, Zimbabwe’s currency is valued at 1,001 ZWL for $1, but it is frequently exchanged for 1,750 ZWL on the streets of Harare, the country’s capital. Annual consumer price inflation in the country fell to one year low of 87.6 percent in March from 92 percent in February.
ZIMBABWE’S ECONOMIC HISTORY AND DIGITAL CURRENCIES
Zimbabwe has suffered huge economic issues in the past, including one of history’s most severe examples of hyperinflation. In the late 2000s, hyperinflation reached astronomical proportions, with prices doubling every few hours, causing the local currency to collapse.
In 2009, the government adopted the US dollar as its primary form of currency in order to stabilise the economy. This, however, was not an effective long-term solution because it hampered the government’s capacity to control its monetary policy. In an attempt to revitalise the economy, Zimbabwe reintroduced its own currency, the Zimbabwe dollar, in 2019. However, the re-introduction has been plagued by rapid price hikes and volatile exchange rates, causing substantial issues for the local population.
The introduction of a gold-backed digital currency is seen as a potential solution to address these challenges. By leveraging the stability of gold as a backing asset, digital currency aims to provide a more stable form of currency for Zimbabweans to store value and protect against currency volatility.
As a result of economic issues, crypto usage has increased in several African countries. The Middle East and North Africa are the fastest-growing regions for crypto adoption, primarily to cross-border remittances, with over $566 billion in crypto transactions between July 2021 and June 2022, up 48 percent from the previous year, according to Chainalysis.
For all the latest business News Click Here
