The International Monetary Fund (IMF) has advised Zimbabwe against adopting a gold-backed digital currency as a solution to address macro-economic challenges, including volatility in the local currency.
Instead, the IMF has suggested that Zimbabwe should focus on liberalizing its foreign exchange market. The Reserve Bank of Zimbabwe (RBZ) began selling digital tokens to investors in May 2023 for $5 for individuals while corporates and other institutions pay $5,000.
Zimbabwe 🇿🇼 used nearly 140 kilograms of gold reserves to back the first sale of its digital money.
The central bank received 135 applications valued at $12 million to purchase the gold-backed digital tokens.https://t.co/XjOaneY1jm pic.twitter.com/w0lHXCvDE5
— BitKE (@BitcoinKE) May 12, 2023
Speaking to Bloomberg, an IMF spokersperson said:
“A careful assessment should be conducted to ensure the benefits from this measure outweigh the costs and potential risks including, for instance, macro-economic and financial stability risks, legal and operational risks, governance risks, cost of forgone FX reserves.”
Authorities at the global lender, headquartered in Washington, have requested leaders in the southern African country to consider using known measures to address economic challenges plaguing the country.
The measures referenced by the IMF include maintaining a tight monetary policy stance and implementing a swift liberalization of Zimbabwe’s foreign currency market. This would involve removing restrictions on the exchange rate at which banking institutions, regulated dealers, and businesses can transact.
The digital tokens, launched in May 2023, are part of its measures to stabilize the tumbling Zimbabwe dollar and offer an alternative to the U.S. dollar.
“The tokens will be available for sale, through banks, in both foreign currency and Zimbabwe dollar. Banks will create dedicated or specific accounts for the holding of the gold-backed digital tokens (e-gold wallets or e-gold cards). Holders of physical gold coins, at their discretion, will be able to exchange or convert, through the banking system, the physical gold coins into gold-backed digital tokens,” the central bank said.
The Zimbabwean currency depreciated by 40% in reference to the U.S dollar in 2023, with the official exchange rate at 1,070 and rates ranging from 1,500 to 2,300 on unofficial markets.
The IMF in 2022 also raised issues with the Central African Republic’s adoption of Bitcoin as legal tender, a decision the nation reversed a year later.
