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Mnangagwa clashes with IMF on gold coins, claims US$27,5m profit

President Emmerson Mnangagwa claims 28 000 gold coins have been sold since their introduction last year, helping to raise ZWL22,2 billion (US$27,5 million) and dealing a blow to the parallel market.

Mnangagwa said this while heaping praise on the gold coins idea as an economic stabiliser. The President’s sentiments equally dismiss the International Monetary Fund (IMF)’s position that gold coins were actually worsening the financial problems instead of solving them.

Writing in his weekly column in the Sunday Mail on Sunday, Mnangagwa hailed the Reserve Bank of Zimbabwe (RBZ) for the gold coins idea.

“Our banking institutions are in a fine fettle. Our financial market is growing in depth, with new instruments being brought to bear, and making any surpluses investible. In this regard, the introduction of gold coins has been outstanding.

“To date, some 28 000 coins have been sold, raising some $22,2 billion, or US$27,5 million. Until now, all this money was either stashed at home, or was wreaking havoc in our economy through illicit parallel market-related activities,” he said.

This comes at a time when the country is facing a plethora of challenges that include financial and economic crises worsened by power outages.

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Inflation has led to the country’s legal tender falling every week against the United States dollar.

The IMF team led by Dhaneshwar Ghura, in December last year conducted a mission to Harare, in the context of the 2023 Article IV Consultation. One of the recommendations made by the team 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.”

In January RBZ chief John Mangudya defended the gold coins arguing the IMF “view the issuance of gold coins as tantamount to intervening in the foreign exchange market, thus depleting foreign exchange reserves.

“The bank (RBZ), however, views the gold coins as an alternative product or asset to foreign currency in the economy’s dual currency system,.”

“..hence a retail open market operations instrument for store of value and for mopping excess liquidity.

“Use of gold coins for mopping excess liquidity is particularly important in the dual currency environment where the public has a choice of holding both the US$ and local currency.”