Zimbabwe’s Finance Minister, Mthuli Ncube, revealed plans on Monday to stabilize the country’s local currency by linking the exchange rate to hard assets such as gold and implementing a currency board system.
This move comes as the Zimbabwean dollar has depreciated by approximately 40% since the beginning of the year, driven by increased demand for foreign currency due to December bonuses for civil servants and declining commodity prices.
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Ncube explained, “The idea going forward is to make sure that we manage the growth of liquidity… by linking the exchange rate to some hard asset such as gold.” He emphasized the necessity of a currency board system to restrict domestic liquidity growth based on the value of the asset backing the currency.
Further details on these measures are expected to be announced in due course. Ncube expressed confidence that these strategies would provide a lasting solution to currency volatility, echoing the government’s determination to address the economic challenges that have plagued Zimbabwe since the era of former leader Robert Mugabe.
In 2019, the government reintroduced the local currency after a decade of dollarization, only to witness rapid devaluation, prompting a reauthorization of foreign currencies for domestic transactions. The proposed measures signify a concerted effort to restore stability and confidence in Zimbabwe’s financial landscape.
