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Zimbabwe is on the eve of the Introduction of a new currency, backed by the national gold reserves, in an attempt by President Emmerson Mnangagwa's government to end decades of monetary instability. This move is seen as the latest attempt to curb the financial chaos plaguing the country. In February, Zimbabwe's finance minister suggested, Mthuli Ncube, in a Online press conference Also the idea of backing the currency with gold in order to put an end to the instability of the exchange rate.
After a visit to the central bank vault, Mnangagwa stated that Zimbabwe has sufficient gold reserves to support the new "structured currency". However, this claim has been met with skepticism by analysts, who doubt the sufficiency of these reserves.
The introduction of the new currency follows the rapid devaluation of the current Zimbabwean dollar, which has depreciated significantly this year. Since the reintroduction of the local currency by Mnangagwa's ruling Zanu-PF party, after the Hyperinflation of 2008 which destroyed the original coin, its value has fallen drastically.
Analysts and economists point to deeper problems, such as the Mnangagwa government's printing of money to cover spending, which has led to a widespread lack of confidence in the currency among Zimbabweans. This has led to the phenomenon of "mattress banking", where citizens prefer to keep their money at home.
There are also doubts about whether the country has sufficient reserves to support a currency pegged to the value of the country's gold. By comparison, South Africa, a larger neighbour, has about 125 tonnes gold in reserve, while Zimbabwe has only a little more than a tonne of gold in its own vaults, in addition to 1.5 tonnes held abroad.
Zimbabwe cannot rebuild its reserves without access to international markets and multilateral support, which have been cut off by decades of arrears on much of its external debt. Mnangagwa has made new attempts to break financial isolation and clear debts since he took power from Robert Mugabe in 2017.
Despite this, Zimbabwe continues to face significant challenges, including a severe regional drought that has destroyed much of the crop this year, requiring more than $2 billion for emergency relief. The Mnangagwa government continues to look for ways to restore economic and monetary stability in the country.
On Thursday 16 May 2024, Holland Gold will host a event on Gold and world politics in the Georg Kessler Lounge at the AFAS AZ Stadium.
The event consists of three parts: one interview, one presentation and a Q&A session for the audience. For example, the gold rush is discussed in World Politics, the geopolitical tensions that are rising every day; in Ukraine, the Middle East, in West Africa and around Taiwan. What impact does this have on the financial system? Central banks seem to be caught in a gold rush. The yellow metal achieves a Record price. How long will the US dollar remain dominant?
Buy your tickets here: https://www.hollandgold.nl/evenement/
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On behalf of Holland Gold, Paul Buitink and Joris Beemsterboer interview various economists and experts in the field of macroeconomics. The aim of the podcast is to provide the viewer with a better picture and guidance in an increasingly rapidly changing macroeconomic and monetary landscape. Click here to subscribe.
