Zimbabwe runs out of dollars and launches a curious bet to try to curb its inflation of close to 100% per year

Zimbabwe, a gold producer, is betting on a cryptocurrency backed by that mineral. (REUTERS/Philimon Bulawayo) (PHILIMON BULAWAYO/)

The African country today introduces a digital currency linked to the price of gold. with this new cryptocurrency, the Central Bank hopes to curb the hyperinflation that is plaguing the country.

In this southern African country, where the local currency has collapsed, it will now be possible to pay with a digital token gold with an e-gold card or save with a gold e-value. This possibility will be open to companies from May 8 – from $5,000 invested – and later to individuals for a minimum amount of ten dollars. This is an attractive proposition in a country where bitcoin is already very popular. It has replaced the national currency, the dollar, as a safe but difficult to obtain currency.

Last year, when inflation flirted with the 200%, the governor of the central bank introduced gold coins in the hope of stemming the decline of the Zimbabwean dollar and making up for the lack of US dollars. The wealthiest, especially businessmen, bought these coins to protect the value of their assets. Inflation is now half, but it is still a real problem, of the 87% according to the official rate.

One coin for all

Gold-backed cryptocurrency is a type of extension that is both secure and popular. At $1,800 each, the coins released last July were reserved for the very rich. The smallest division of the new token will cost about six cents. So it’s a coin for everyone starting today. The launch of a gold cryptocurrency it also marks the return of the barbarian icon. It is one of the oldest reserve currencies, used since ancient times in Egypt.

In these troubled times, everyone flocks to gold. Its price is currently above $2,000 an ounce, a historically high level. Since gold is much more stable than bitcoins, this digital currency seems more secure. Zimbabwe is riding this wave. With a big advantage: it is a gold producer, so you don’t need to import gold to create your new currency.

The failure of the Zimbabwean dollar

Economists are skeptical about the real power of this new digital currency. They are concerned about its convertibility with the Zimbabwean dollar. It is true that the Zimbabwean dollar reintroduced in 2019 is a failure, a currency hated by citizens and hardly credible. It is rejected by merchants and even in some government offices. Today, in the official market, it takes 1,000 units of the Zimbabwean dollar to get one US dollar. On the black market, it costs twice as much.

The Zimbabwean dollar is rejected by savers.  Inflation last year reached 200% REUTERS/Philimon Bulawayo
The Zimbabwean dollar is rejected by savers. Inflation last year reached 200% REUTERS/Philimon Bulawayo (PHILIMON BULAWAYO/)

Will this new high-tech coin that shines like gold be Zimbabwe’s new money? It looks like money, but it is not quite, given the opacity that surrounds it, warn these experts. It’s more of a smoke screen 2.0 masking the good old money press. With the presidential elections scheduled for July, it is working at full speed, denounce the economists, which accentuates the debacle of the local currency a little more.

More than 10 years of inflation

It is not certain that this new digital currency will quickly gain the trust of users. The memory of savings that vanished during the hyperinflation of 2008 and 2009 is still too raw for Zimbabweans to easily believe in the value of substitutes.

Zimbabwe has been drowning in inflation of two and sometimes three digits. President Emmerson Mnangagwa He promised to turn his country into a middle-income economy by 2030. But since coming to power, he has been unable to restore confidence in the local currency. The Uncle Sam currency remains the currency of the real Zimbabwean economy. For example, tobacco is currently paid to farmers in US dollars.

Originally Posted by RFI