HARARE, Zimbabwe: To curb runaway inflation that has further eroded its unstable currency, Zimbabwe has adopted the use of gold coins as legal tender, which will be sold to the public.
The move was announced this week by the country's central bank, the Reserve Bank of Zimbabwe, and is aimed at boosting confidence in the local currency, which crashed after people's savings were wiped out by hyperinflation in 2008, which reached 5 billion percent, according to the International Monetary Fund.
This week, the central bank disbursed 2,000 gold coins to commercial banks.
John Mangudya, governor of the Reserve Bank of Zimbabwe, said the first group of coins was minted outside the country, but eventually will be manufactured locally.
The coins can be used for purchases in shops, depending on whether the shop has enough change, he added.
"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," said Zimbabwean economist Prosper Chitambara, as quoted by Reuters.
The central bank said any individual or company can purchase the coins, called Mosi-oa-Tunya, which in the local Tonga language refers to Victoria Falls, from authorized outlets such as banks, but foreigners can only buy the coins in foreign currency shops.
The coins "will have liquid asset status, that is, it will be capable of being easily converted to cash, and will be tradable locally and internationally. The coin may also be used for transactional purposes," the central bank added, noting that those holding the coins can only trade them for cash after 180 days from their purchase date.
Each weighing one troy ounce with a purity of 22 carats, the coins can also be used as security for loans and credit facilities, said the central bank.
Chitambara said gold coins are used in countries, such as China, South Africa and Australia, to hedge against inflation and as an investment vehicle, but they are not as widely used as currency.
"For Zimbabwe, we are in chronic hyperinflation, so the expectation is that there will be a huge uptake of these gold coins," he added, stressing that most Zimbabweans struggle with daily survival and are not able to purchase them.