The central bank governor of Zimbabwe, John Mangudya, has announced plans to introduce a gold-backed digital currency to help stabilize the local unit, which has been depreciating against the US dollar. The move is intended to enable individuals holding small amounts of Zimbabwe dollars to exchange their money for digital tokens that can store value and hedge against currency volatility. According to Mangudya, the tokens will help ensure that everyone can buy gold units, leaving no one behind.
Last year, Zimbabwe introduced gold coins to mop up excess liquidity and stabilize the local unit. Although the official exchange rate is Z$1,000.4 against the dollar, the currency readily changes hands at Z$1,750 on the streets of the capital. Mangudya attributed the current exchange rate volatility to expectations of increased foreign currency supply in the market during the tobacco auction season, which started in March.
Since the start of the auction season, Zimbabwe has exported 54.9 kilograms of tobacco valued at $307 million, compared to 57 million kilograms valued at $295.5 million during the same period last year. Zimbabwe abandoned its currency in 2009 after an episode of hyperinflation rendered the local money worthless. It was replaced mainly with the US dollar. The Zimbabwe dollar was reintroduced in 2019 to revive the stagnating economy, but the government made the greenback legal tender again in June to try to tame rampant price increases.