There’s no sense in selling gold when it can be used to back up the Zimdollar: Biti slams gold coins

CCC VP and Former Finance Minister Tendai Biti

The Reserve Bank of Zimbabwe said it would start selling gold coins this month as a store of value to tame runaway inflation, which has considerably weakened the local currency.

The central bank governor John Mangudya said in a statement on Monday that the coins will be available for sale from July 25 in local currency, United States dollars and other foreign currencies at a price based on the prevailing international price of gold and the cost of production.

The “Mosi-oa-tunya” coin, named after Victoria Falls, can be converted into cash and be traded locally and internationally, the central bank said.

The gold coin will contain one troy ounce of gold and will be sold by Fidelity Gold Refinery, Aurex and local banks, it added.

Gold coins are used by investors internationally to hedge against inflation and wars.

“Upon purchase, the buyer will take physical possession of the coin and be issued with a bearer ownership certificate. The buyer or holder of the coin may opt to place it in the custody of bankers of own choice in which case a safe custody certificate/receipt will also be issued,” Mangudya said.

Tendai Biti, the former finance minister and deputy leader of the main opposition Citizens Coalition for Change warned that the gold coins were not the magic bullet that will rescue the Zimbabwe dollar.

“The Zimbabwe dollar is in tatters due to among other things the lack of reserves and the absence of anything to back it up. There is therefore no sense in selling gold when it can be used to back up the tattered currency,” Biti said.

“Selling gold particularly in local currency allows cartels with billions in Zimbabwe dollars to hedge the same with gold, the same way they have been buying the US dollar on the black market. It also allows foreign crooks to launder their money in Zimbabwe via gold coins. Only a kakistocratic state does this.”

Last week, Zimbabwe more than doubled its policy rate to 200 percent from 80 percent and outlined plans to make the United States dollar legal tender for the next five years to boost confidence.

Soaring inflation has been piling pressure on a population already struggling with shortages and stirring memories of economic chaos years ago under veteran leader Robert Mugabe’s near four-decade rule.

Annual inflation, which hit almost 192 percent in June, cast a shadow over President Emmerson Mnangagwa’s bid to revitalise the economy.

Zimbabwe abandoned its inflation-ravaged dollar in 2009, opting instead to use foreign currencies, mostly the US dollar. The government reintroduced the local currency in 2019, but it has rapidly lost value again.

– Reuters

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