Zimbabwe prepares for new currency as Mnangagwa tours gold reserves

HARARE – President Emmerson Mnangagwa toured the Reserve Bank of Zimbabwe (RBZ) vaults on Thursday in anticipation of the monetary policy statement expected tomorrow.

This visit comes amidst a push for a gold-backed “structured currency” to combat the nation’s ongoing currency woes.

Incoming RBZ governor John Mushayavanhu said the central bank is holding an excess of 1.5 tonnes of gold.

“One of the first things I had to do upon taking over was to verify the assets that the central bank owns, in particular, the cash holdings that we have, the gold and other precious minerals that we are also holding as reserves.

“I can confirm that we have 1.1 tonnes of gold and other precious minerals in the form of diamonds which if converted to gold will be equal to 0.4 tonnes of gold making a total of 1.5 tonnes of what we are holding,” Mushayavanhu said.

Mushayavanhu said an additional 1 tonne of gold is being held offshore, while US$100 million in cash reserves is being held by the RBZ. These reserves, according to Finance Ministry Permanent Secretary George Guvamatanga, are sufficient to back the Zimbabwe Dollar.

The RBZ has been actively accumulating gold by demanding a portion of mining royalties be paid in the precious metal.

President Mnangagwa emphasised the importance of these reserves, stating, “we wanted to see these assets physically.”

“We wanted to physically see these assets, because in the past we didn’t have any reserves in commodities here. We sold all our minerals. Then I gave an instruction that we need 10% of our minerals kept in solid commodities,” he said.

Professor Gift Mugano, a prominent Zimbabwean economist, has outlined significant challenges facing the local currency. Writing on his X handle, he identifies several factors critical to the success of any domestic currency, including:

Controlling money printing and excess liquidity, addressing the dominance of the informal sector, combating drought and low commodity prices, rebuilding public confidence shaken by past economic turmoil, and implementing clear structural policies for long-term economic growth.

He also urged authorities to foster a productive national environment and promoting political unity and social cohesion.

Professor Mugano expressed skepticism regarding the gold-backed structured currency, citing the failures of previous bond notes and gold coins due to the very issues he raises.

“Broken politics. We have invested so much energy on disunity and hate speech instead of fostering peace, unity, tolerance and love. We are allergic to national dialogue, social contract, divergent views, etc.

“Ironically, we expect to see flawless implementation of public policies and attainment of the desired economic goals when we are divided?

“Structured currency = bond note, gold coins/gold token/ZiG. Bond note & ZiG were/are local currencies backed by USD & gold, respectively, but failed dismally because of the reasons I mentioned above.

“This is why I am convinced that a local currency or structured currency will always fail as long as the factors raised above are not adequately addressed,” Mugano said.

Tomorrow’s monetary policy statement is expected to detail the government’s plan for the structured currency and how it aims to address these critical economic challenges.