Zimbabwe is launching gold-backed digital tokens ahead of the country’s elections. Under the leadership of their President Emmerson Mnangagwa, the government is taking this step as they are struggling to uplift the southern African country’s currency months before the official elections. The value of the Zimbabwean currency is falling in the international market due to inflation.
Accordingly, The Reserve Bank of Zimbabwe said the tokens would “expand the value-preserving instruments available in the economy.” Sources suggest that this is a reference to a sharp drop in the value of the Zimbabwe dollar. However, at the same time, the planned launch of gold tokens throws a spotlight on another round of currency chaos.
The sources suggest that the ruling Zanu-PF party is orchestrating the currency crisis. This is due to their use of money printing ahead of elections this summer.
The Zimbabwe dollar has lost more than half its value since the end of last year, 2022. Currently, the value of the Zimbabwe dollar stands at about 2,200 against the US dollar in the country’s parallel market. Comparatively, the currency’s official rate is about Z$ 1,000, derived from foreign exchange auctions to importers.
Now Harare is betting on the success of the digital investment. They hope that it is backing with gold will dampen price pressures in a country that has suffered regular rounds of hyperinflation. The digital currency launch on Monday will follow the issuance last July of physical gold coins as stores of value.
Zimbabwe produced 35 tonnes of gold last year, and the central bank is a leading buyer via a gold trading subsidiary. Last week, prices for gold futures matched an all-time high of $2,072 a troy ounce. The central bank has said the digital tokens are backed by gold in its reserves and will be redeemable at international prices after 180 days. But analysts have called the scheme a distraction from the root causes of the currency crisis.