Due to the lack of confidence in its currency, Zimbabwe has decided to introduce a digital currency backed by gold. The currency is expected to let citizens store value and protect themselves from exchange rate volatility. 

Zimbabwe will soon launch a gold-backed digital currency in an attempt to stabilize its fiat currency, whose continued depreciation against the U.S. dollar is strangling the economy, local media outlet The Sunday Mail reported last Sunday, citing Central Bank Governor John Mangudya (photo).

According to the media outlet, the central bank governor explained that the planned currency would enable people with tiny quantities of Zimbabwean dollars to trade their money for digital tokens to preserve value and hedge against currency fluctuation. 

He said the current high volatility in the exchange rate is linked to expectations of an increase in the supply of foreign currency in the market, with the start of the tobacco auction season. Indeed, the Tobacco Industry and Marketing Board (TIMB) announced on March 8 that national tobacco production is expected to increase by 8.5% in 2023 to 230 million kg, thanks to good weather conditions and an increase in planted area. 

Zimbabwe is facing a severe economic crisis since the early 2000s after former President Robert Mugabe's land reform broke up a key sector of the country's economy and forced it to stop repaying nearly $13 billion in debts to the World Bank, the African Development Bank (AfDB), the European Investment Bank (EIB) and Paris Club member countries.

The expropriation of white farmers discouraged foreign investment and led to a sharp drop in exports, prompting the Mugabe regime to start printing large amounts of money, leading to a long period of hyperinflation. Against this backdrop, the government was forced to abandon the Zimbabwean dollar in favor of the U.S. dollar in 2009. The Zimbabwean dollar was then reintroduced in 2019 in an attempt to revive the stagnant economy, but it has since continued to depreciate against the greenback.

Confidence in the Zimbabwean currency has been low since people saw their savings wiped out by hyperinflation that reached 5 billion percent in 2008, according to the IMF. Most Zimbabweans prefer buying U.S. dollars on the black market to keep them as savings.