Zimbabwe’s faltering economy is now betting on yet another way to tame inflation: the power of digital currency with the newly introduced, gold-backed digital token.

Still the project sees its tough road ahead, partly because low internet penetration leaves many citizens outside its digital economic drive. But as hurdles persist, Zimbabwe’s 16 million people might benefit from a digital currency as the government plans to make it one of the drivers to revitalize its battered economy.

Zimbabwe is among Africa’s leading gold mining countries with its annual output totaled 46.4 tons in 2021, according to data compiled by the World Gold Council. But that has done little to stabilize its economy.

Here are some of the economic highlights in Zimbabwe since January this year:

*(Harare, the capital city of Zimbabwe / Photo by Unsplash)*

January 2023 – Gloomy Outlook

Economists predicted Zimbabwe’s economy to worsen in the new year, as the December 2022 inflation was recorded at an eye-popping 280%, one of the highest in the world. The Zimbabwean dollar weakened to the US dollar trading at 930=$1. In October 2022, the dollar was at 700 to $1.
The World Bank gave a 2.9% projected growth for the country this year. Real GDP growth is estimated to have slowed to 3.4% in 2022 on the back of worsening agriculture conditions and economic instability.

February 2023: An Attempt at Easing Hyperinflation?

Zimbabwe’s consumer price index was 92.3%. This was improved significantly from the prior month’s 229.8% and moved further away from August’s 18-month high of 285%. The annual inflation has been on a downward trend since September 2022.
The Reserve Bank of Zimbabwe (RBZ) cut its policy rate by 50 percentage points to 150%. Monthly inflation fell to 1.1% in January from 2.4% in December, while yearly inflation dipped to 229.8% from 243.8%.

March 2023: Big Drift to USD-Based Stock Exchange

Zimbabwe became the second African country to cut its key interest rate twice so far in 2023, as inflation is forecast to ease further. The monetary policy committee reduced the rate to 140% from 150%, following the footsteps of Angola. Angola’s Banco Nacional de Angola lowered the benchmark rate to 17% from 18% in March, the second drop in 2023.
A number of listed companies on the Zimbabwe Stock Exchange (ZSE) moved to the dollar demonimated Victoria Falls Stock Exchange (VFEX). VFEX was set up in 2020, and is designed to facilitate the listing and trading of foreign currency-denominated securities, primarily targeting foreign investors.

April 2023: How is the Business of Gold Digging Done?

The free-falling Zimbabwean dollar forced telecom operators to adjust their rates by up to 50%. ITWeb Africa reported that Zimbabwe’s currency lost value against the US Dollar, falling by more than 70%. Telecom companies and Internet service providers are expected to move ahead with another round of hikes.
In a bid to stem the weakening of the Zimbabwean dollar and the hyperinflation, the RBZ announced plans for a digital currency by introducing “tokens” that are backed by gold reserves and can be transferred between people and businesses in a peer-to-peer payment model.

May 2023: Now, Here Comes the Gold Rush

The Zimbabwe government launched its digital token backed by gold as a new currency, aimed to remedy the weakening Zimbabwean dollars. By May 12, the RBZ had sold 14 billion Zimbabwean dollars’ worth of gold-backed digital tokens — worth around $39 million, the Cointelegraph reported.
Even as the digital currency gets off to a smooth start, the International Monetary Fund said the country should rather liberalize its foreign-exchange market than launching a gold-backed digital currency to deal with macroeconomic challenges like volatility in the local unit.
The value of stocks on Victoria Falls Stock Exchange, a dollar-only stock exchange, jumped by 85% since the start of the year to more than $1 billion, VFEX CEO Justin Bgoni told Reuters, adding he anticipated continued growth. The Zimbabwe Stock Exchange had witnessed an exodus of some listed stocks to the VFEX.

-Edited by Shigeru Sato, Faustine Ngila