Farirai Machivenyika Senior Reporter
GOLD coins that the Central Bank will introduce later this month are expected to bring stability to the local currency against major foreign currencies benefitting ordinary people through stable prices of commodities, RBZ Governor Dr John Mangudya told the Parliamentary Committee on Budget, Finance, and Economic Development today.
Dr Mangudya appeared before the committee to brief it on the operations of the foreign currency auction system and measures being implemented to stabilise the Zimbabwe dollar.
He said the introduction of gold coins, slated for July 25 was meant to offer an alternative investment instrument for individuals and corporates.
“The first step is to ensure that we absorb the excess liquidity that is in the market and is used for store value so where people were going to the parallel market to look for a store of value, we are giving them an alternative instrument which is the gold coin to invest into, if they are bona fide transactions we are giving them an alternative product that they can invest in so that they no longer go to the parallel market.
“How will a layman benefit from this? They will benefit because if we don’t go to the parallel market, the parallel market rate stabilises and the ordinary person will benefit more from the stability that these gold coins, all things being equal, will achieve. When there is stability, money will have value and result in stable prices,” he said.
Dr Mangudya said the coins will be sold at the prevailing auction or willing buyer willing seller rate to discourage the use of the US dollar as a store of value.
“We are going to sell the gold coins at the official exchange rate plus the cost of printing (five percent of the selling price),” he said.
“If you are an individual who was participating at the parallel market and you are a rational individual what will be the reason to go and buy foreign currency at $600-$700: US$1 at the parallel market if it was a store of value when there is a gold coin you can buy at the willing buyer willing seller rate or auction rate. The rate should go down unless people will be doing it for other reasons.”
The RBZ governor said the gold coin would be sold locally and internationally and will also be used as collateral.
Individuals will also be able to trade them amongst themselves.
Meanwhile, Dr Mangudya said there was a need for Government to adjust its procurement procedures as money paid to suppliers of goods and services was fuelling the black market rate.
He said most of the excess liquidity on the market was coming from entities that do business with Government.