Zimbabwe turning to gold coins to counter its inflation

HARARE, Zimbabwe — This nation has launched gold coins to be sold to the public in a bid to tame runaway inflation that has further eroded the country’s unstable currency.

The unprecedented move was announced Monday by the country’s central bank to boost confidence in the local currency.

Trust in Zimbabwe’s currency is low after people saw their savings wiped out by hyperinflation in 2008 that reached 5 billion percent, according to the International Monetary Fund.

With strong memories of that disastrous inflation, many Zimbabweans today prefer to scramble on the illegal market for scarce U.S. dollars to keep at home as savings or for daily transactions. Faith in Zimbabwe’s currency is already so low that many retailers don’t accept it.

The central bank disbursed 2,000 coins to commercial banks Monday. The first batch was minted outside the country, but eventually the coins will be produced locally, according to John Mangudya, the central bank’s governor.

The coins can be used for purchases in shops, depending on whether they have enough change, he said.

“The government is trying to moderate the very high demand for the U.S. dollar because this high demand is not being matched by supply,” Zimbabwean economist Prosper Chitambara said.

“The expectation is that … there will also be moderation in terms of the depreciation of the local currency, which should have some kind of stabilizing effect in terms of pricing of goods,” he said.

Any individual or company can buy the coins from authorized outlets such as banks and can keep the coins at a bank or take them home, according to an announcement by the central bank. Foreigners can buy the coins only in foreign currency.

Called Mosi-oa-Tunya, which in the local Tonga language refers to Victoria Falls, the coins “will have liquid asset status, that is, it will be capable of being easily converted to cash, and will be tradeable locally and internationally. The coin may also be used for transactional purposes,” the bank said. People holding the coins can only trade them for cash after 180 days from the date of buying.

The coins can also be used as security for loans and credit facilities, the bank said. The price of the coins will be determined by the international market rate for an ounce of gold, plus 5 percent for the cost of producing the coin.

At the time of the launch Monday, the cost of Mosi-oa-Tunya was $1,824.

Internationally, gold coins are used in countries such as China, South Africa and Australia to hedge against inflation and as an investment opportunity, although they are not as widely used as currency as envisaged by Zimbabwe’s central bank, Chitambara said.