The unprecedented move was announced Monday by the country's central bank, the Reserve Bank of Zimbabwe, to boost confidence in the local 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 tradable locally and internationally. The coin may also be used for transactional purposes,” said the central bank.
The coins, each weighing one troy ounce (32 grams) with a purity of 22 carats, can also be used as security for loans and credit facilities, according to the central bank. The price of the coins will be determined by the international market rate for an ounce of gold, plus 5% for the cost of producing the coin. At the time of the launch Monday, the cost of Mosi oa Tunya coin was $1,824.
The central bank distributed 2,000 coins to commercial banks on Monday. The first batch of the coins was minted outside the country but eventually they will be produced locally, according to the governor of the Reserve Bank of Zimbabwe, John Mangudya.
“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.
Internationally, gold coins are used in countries such as China, South Africa and Australia to hedge against inflation , although they are not as widely used as currency as planned by Zimbabwe’s central bank, said Chitambara.
The fact that Zimbabwe's central bank would have to buy the gold from miners of the metal such as informal artisanal miners could also present challenges and result in increased smuggling, analysts say.
“Gold deliveries in Zimbabwe have significantly recovered because of the appetizing U.S. dollar payments offered to artisanal miners," noted securities firm Morgan & Co in a market intelligence report.
Zimbabwe has substantial gold deposits and exports of the precious metal is one of the southern African country’s major foreign currency earners. Gold production improved to about 30 tons in 2021, compared to 19 tons in 2020, according to official figures. Small–scale producers such as poorly regulated artisanal miners contributed 19 tons of the gold delivered in 2021, according to official figures.
Legally all gold mined in Zimbabwe is supposed to be sold to the central bank, but many producers prefer to smuggle the gold out of the country in order to get payment in U.S. dollars.