Zimbabwe Lets Currency Free-Fall while it weighs gold standard. The southern African nation, which has suffered from hyperinflation, with currency falling at 20,000 per dollar, is allowing a free fall in its currency that it’s no longer keen to defend and is working on a new exchange rate potentially backed by gold.
The Zimbabwean dollar has breached another significant threshold, dropping below 20,000 against the US dollar after its decline past the 10,000 level in late January, according to data compiled by the government. On March 24th, the currency traded at 20,389 per greenback, reflecting cumulative losses of 70% since the year began, making it one of the world’s worst-performing currencies. Zimbabwean authorities are planning to link the exchange rate of the local unit to gold as they try to stabilize the free-falling Zimbabwe dollar.
The structured currency is looking for a pillar of support which is their gold. But if we are to consider that the economy is just under 150 million, it means its under two tonnes of gold. That is what they are trying to mobilise and structure at the moment.
Nyasha Tinashe, Economist – Zimbabwe
The local unit’s slide has not drawn a sharp response from authorities, other than saying they are working on creating a structured currency. Such a structure may be backed by gold, Finance Minister Mthuli Ncube has previously said. The Central Bank has delayed the release of its monetary policy statement while the currency plans are being drafted.The country’s finance minister was quoted recently saying the move would help to manage liquidity and money supply growth, the main drivers of exchange rate volatility and inflation.
Whatever they do, we want stability, right now we are using the US dollar because that is what is stable. We do not want a currency which fluctuates all the time.
Kudakwashe Tadiwa, Trader – Zimbabwe
Since Zimbabwe’s independence in 1980, the country has introduced new currencies several times after citizens and businesses shunned the previous money. The present-day currency, known as the dolla or bond notes ,was introduced in 2014. Within months it started losing value, something economists attributed to the government overprinting notes and businesses failing to have confidence in the currency.
