Zimbabwe Launches Gold-Backed Digital Currency to Stabilize Local Economy

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• The Reserve Bank of Zimbabwe (RBZ) has announced plans to launch a gold-backed digital currency as Zimbabwe struggles with inflation for more than a decade.
• This digital currency will allow the Zimbamweans to trade tiny sums of Zimbabwean dollars for the digital gold token and hedge against their local currency instability.
• The current Zimbabwean dollar exchange rate is trading at 1,001 ZWL per $1 and is routinely traded at 1,750 ZWL per $1 on the streets of Harare.

Zimbabwe to Issue Gold-Backed Digital Currency

The Reserve Bank of Zimbabwe (RBZ) has announced plans to launch a gold-backed digital currency as the country struggles with inflation for more than a decade now. This move is part of the government’s strategy to keep the local currency from depreciating further against the US dollar.

Advantages of Gold-Backed Currency

This gold-backed digital currency will allow the Zimbamweans to trade tiny sums of Zimbabwean dollars for the digital gold token and hedge against their local currency instability. According to RBZ governor John Mangudya, this move is done in order “leave no one and no place behind”.

Current Exchange Rate

The current Zimbabwean dollar exchange rate is trading at 1,001 ZWL per $1 and is routinely traded at 1,750 ZWL per $1 on the streets of Harare. It is expected that this rate could stabilize soon due to increased foreign currency supply in the market because of tobacco season payments made in US Dollars.

Impact on Inflation

It remains yet unclear how exactly this gold-backed digital currency will impact inflation rates in Zimbabwe but it could provide some stability for its citizens during these tumultuous times where there have been reports of shortages in basic goods such as fuel and bread products due to hyperinflationary issues caused by lack of foreign investment and high unemployment rates throughout much of 2020.

Conclusion

The launch of this new gold-backed digital currency could be an interesting addition in terms of managing national currencies within Africa given its potential use cases across other countries who are dealing with similar economic issues that plague developing nations like Zimbabwe