‘Gold coins best bet for mitigating economic risk’

LETTICIA MAGOMBO

ZSE-listed financial institution, ZB, has said that gold coins are one of the best ways of mitigating exchange rate risks, inflation and other economic challenges in Zimbabwe.

Gold coins were introduced by the Reserve Bank of Zimbabwe in July to mop excess local currency balances, blamed for fuelling the parallel market thereby leading to the sharp depreciation of the local currency.

Speaking during an economic presentation at the Zimbabwe Agricultural Show, ZB Bank’s effectiveness manager Michael Mereki said: “The initiative presents a value preservation investment alternative for economic agents, in the face of hyperinflation.”

This opportunity of value retention, he added, was not only for business but for individuals

“By introducing smaller denomination gold coins, the authorities seek to include the rest of the economy, who may have felt excluded, given that not everyone has capacity to purchase the 22-carat gold coin at US$1 800 0r +/- ZW$900k,” Mereki said.

He said this could go a long way towards stabilising the exchange rate by reducing pressure on demand for USD as a store of value.

Another mitigation tool that companies could use, Mereki said, was the creation of export-oriented businesses.

“Exports generate foreign currency, correct trade balance (BOP), stabilise exchange rates / support the value of our local currency and inflation,” Mereki said.

As of August 26, 6799 gold coins had been sold. Of those coins, 75% was bought by corporates and the remainder by individuals.