Gold coins to be afforded by all

Simba Jemwa, Sunday News Reporter

THE Government is planning to introduce smaller gold coins denominations amid revelations that at least Z$8 billion worth of the coins have been bought by locals since they were launched by the Reserve Bank of Zimbabwe in July as part of a raft of measures meant to stabilise the economy and quench the appetite for foreign currency as a store of value.

Speaking to Sunday News in an exclusive interview yesterday, the Minister of Finance and Economic Development, Professor Mthuli Ncube, said the demand for the gold coins has been very high, adding that plans were underway to introduce smaller denominations of the coins.

The minister also spoke about the need to maintain the 200 percent bank interest rate as well as measures that were put in place by Government to rein in speculation through restricted access to the local currency. He also said the expected rate of economic growth for this year has been reviewed from 5,5 percent to 4,6 percent.

Prof Ncube said the Government was happy with the uptake of gold coins and the confidence shown by the market to their introduction. He said Zimbabweans had been largely shunning the local dollar in favour of the US dollar, which locals consider to be more acceptable abroad and better at holding value long term.

“We are happy with the uptake of the gold coin and we so far sold in excess of Z$8 billion since their introduction. Many people are happy with hedging their investments against the gold coins instead of holding onto cash as they have been doing in the past. We are now looking at introducing a smaller denomination to make these gold coins more inclusive across the entire Zimbabwean population. We want every Zimbabwean not to be left behind in our efforts to manage our economy. Every Zimbabwean will be afforded a chance to acquire these gold coins,” he said.

RBZ Governor Dr John Mangudya is on record as saying smaller gold coins, as small as a tenth of an ounce, are expected to go on sale in November so that ordinary people can invest in them and store value for their local currency. The smallest coin, containing just over 3,11g of gold, will cost US$188,48, or local currency equivalent at the interbank rate. The actual price when it is introduced will be the world price of gold for one tenth of a troy ounce plus 5 percent minting and distribution fee. 

The new move of adding half ounce, quarter ounce and tenth ounce coins follows the successful launch of the one ounce Mosi-oa-Tunya gold coins and its sales since July 25. When gold coins were introduced, the one ounce coin cost US$1 884,80 or local equivalent.

Prof Ncube said the revision of the economic growth to 4,6 percent for the year 2022 was a normal adjustment in any well managed economy as it shows constant monitoring of economic patterns by relevant authorities. 

“We are bound by market forces and because of the measures we put in place to rein in speculation and inflation, we expected economic activities to take a knock as well. And this revision is in fact an acknowledgement of these market forces and a reaction to global issues such as rising fuel prices, rising fertiliser prices. These are basic tenets of a properly managed economy. After all, a 4,6 percent growth is well above the global average and we should not be worrying too much about our economic growth revision. We know companies are making some money but most importantly, they are doing it the right way, without the froth of speculation and other such activities.”

The minister said the interest rate which has been holding steady at 200 percent would be maintained as it had allowed Government to reign in inflation and also allowed the local currency to catch up with the parallel market. 

“We were forced to raise interest rates to match the rate of inflation and allow it to be in line with year-on-year inflation which at the time was in that region of 200 percent. In fact, it was slightly higher. So, when you run monetary policy, you always want to make sure you have what we call a positive interest rate. In the past we have allowed the inflation rate to run ahead of interest resulting in negative interest rates and this is what we have since managed to put under control. With the liquidity restrictions we put in place, we have basically caught up with the parallel currency rates which has also allowed us to put a cap on the galloping inflation,” said Prof Ncube.

The policies being implemented by Government to stabilise the economy and strengthen the local currency by removing large sums from circulation and promoting its desirability, have started bearing fruit, with the Zimbabwe dollar becoming scarce as predicted by President Mnangagwa.

The Zimbabwe dollar is now firming against the US dollar on the parallel market and becoming scarce amid growing demand. The latest RBZ auction rate was at Z$585 per US dollar and the interbank rate at Z$604 per US dollar, which brings the official rate almost in line with the parallel market, spread of between Z$650 and Z$700 per greenback. Furthermore, with the currency markets stabilising and fuel prices falling, the central bank now expects businesses to begin cutting prices. In addition, foreign exchange rates have stabilised on the black market, giving a reprieve to consumers who had been hard hit by price increases in the last few months.