Zimbabwe may back its currency with gold in an effort to end exchange-rate instability, Finance Minister Mthuli Ncube said.
“In order to manage growth of liquidity, we may link the exchange rate to a hard asset such as gold,” Ncube said in an online press briefing held Monday to announce a conference of African ministers that Zimbabwe will host at the end of this month.
Zimbabwean President Emmerson Mnangagwa last week signaled the authorities are considering a revamp of the world’s worst-performing currency. He said the Treasury and monetary authorities are working on a “structured currency.”
The authorities have repeatedly tried to rescue the Zimbabwe dollar since its reintroduction in 2019 after scrapping it a decade earlier when hyperinflation erased its value. Steps taken include introducing gold coins and bullion-backed digital tokens known as ZiG, but both failed to end the slide. The International Monetary Fund has in the past been critical of the unconventional ways preferred by officials to stem the local unit’s decline.
The president sought to provide “policy forward guidance” to the market on currency and monetary policy reforms that are being considered, Ncube said in his first remarks since Mnangagwa’s comments on Feb. 6. The southern African nation is also weighing the feasibility of establishing a currency board, he said.
“This will provide a lasting solution to the volatility” of the exchange rate, Ncube said.
A currency board if “done properly may turn out to be helpful” in managing the often-volatile exchange rate, according to Lloyd Mlotshwa, the head of research at IH Securities, a brokerage firm based in the capital, Harare.
Zimbabwe considered setting up a board as recently as two years ago, but authorities didn’t follow through with the proposal.
The Zimbabwe dollar has slumped almost 50% against the greenback this year after plunging 90% in 2023, making it the world’s worst performer over the period. It traded at Z$11,617 per US dollar on Monday, according to data posted on the central bank’s website.
