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Mthuli Ncube knocks back IMF recommendation to get rid of gold coins

President Emmerson Mnangagwa’s administration has pointed a middle finger at the recommendations made by the International Monetary Fund (IMF) on measures to ease inflation in Zimbabwe.

The Fund’s staff team led by Dhaneshwar Ghura conducted a mission to Harare during December 1-15, 2022, in the context of the 2023 Article IV Consultation.

At the conclusion of the mission, they made a number of recommendations aimed at helping the southern African country curb the skyrocketing inflation. One of the recommendations was for the government to do away with the gold coins.

“A near-term policy imperative is to sustainably anchor macroeconomic stability,” read the statement by Mr. Ghura.

“In this context, Fund staff recommend accelerating the liberalization of the FX market, including through the removal of restrictions on the exchange rate at which banks, authorized dealers, and businesses transact, addressing the Reserve Bank of Zimbabwe’s quasi-fiscal operations to mitigate liquidity pressures; maintaining an appropriately tight monetary policy stance ter durably restore macroeconomic stability and ensure social stability; restoring the nominal anchor for monetary policy, including through the use of appropriate interest-bearing instruments to mop up liquidity and winding down the use of gold coins; and maintaining a prudent fiscal stance.”

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But speaking in Parliament on Thursday, Zimbabwe’s Finance Minister Mthuli Ncube dismissed the IMF recommendation on gold coins pointing out that that their invention was “assisting in mopping up liquidity”.

“The measures we have taken in the last few months, in the 3rd and 4th quarter and we have maintained those measures, are aimed at exactly that and that is why you are seeing stability in the domestic currency, the narrowing of the gap between the official and parallel rate,” he said.

“We are also seeing month-on-month inflation beginning to fall followed by year-on-year inflation. So the policies are working and the positive real interest rates are working and the fiscal tightness that we have been practicing is working.

“The introduction of the gold coins which are also assisting in mopping up liquidity while being a social value preservation for investors are all contributing to deal with inflation and currency volatility.

The Reserve Bank of Zimbabwe Monetary Policy Committee Member Persistence Gwanyanya said : “1) MPC and RBZ never viewed Gold Coins as a silver bullet but necessary intervention at the time. 2) The idea of gold coins was mooted to reverse the accelerated depreciation of the ZWL.”