Harare - The Monetary Policy Committee (MPC) said gold coins, have seen a significant uptake as 75% of the first issue made last week have been bought.
The 75% translates to 1 500 coins bought from a batch of 2000 coins.
Of the coins sold, 85% were bought in local currency while the remainder were bought in foreign currency.
The MPC said a further 2000 coins will be released into market this week.
The committed noted that the positive uptake will buttress efforts to stabilize the currency through tightening the monetary policy.
The first batch of 2000 coins were sold at a price which was close to US$1823/ coin.
The price of the gold coin is arrived at after factoring the spot price of gold on international markets and additional production and distribution costs, which Zimbabwe has set at 5%, hence the price will change each week in line with the changes in the international prices.
The total amount of coins sold in Zimdollar is equivalent to about ZWL$1.008 billion which is about 3% of the total Reserve Money (RM).
Reserve Money is high powered money at the discretion of authorities. RM included notes and coins in circulation but also includes Reserve Requirements (RR) and other deposits with RBZ (government deposits).
The RBZ can use the coin sales to manage liquidity in the market. There is a general appreciation that the panicky market is out to find something to hold on to given the gravity of Zimdollar depreciation. The default has been to grab any asset in sight or the US dollar, so as to preserve value.
The introduction of Gold Coins came into effect as possibly value preservation mechanism and alternative to the USD purchases. The selling point from a government perspective was that coins would retain a stable value denominated in foreign currency.
However, on its part, the Bank would benefit, through liquidity mop up. The Bank has a chance to mop up excess liquidity from the market through the initiative as holders of excess liquidity cede it for gold coins.
The exercise will however need more care than presently meets the eye. The gold being utilized to make the gold coins is primarily being procured from gold producers, who are paid forex for their deliveries. The Bank pays small scale miners with hard currency and processes same only to sell it in Zimdollar. This means the country will be foregoing export receipts and could result in a worse off external trade position.
Further, challenges may worsen if the exchange rate keeps on a nosedive. This would mean that the bank will be deliberating forex at discounted rates and this may speed up a near term crush of the local unit. Depending on the premium between the auction and parallel, the arbitrage which may exist at that point may speed up the currency’s demise.
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