Harare, Zimbabwe — Zimbabwe has launched a public sale of gold coins in a bid to tame runaway inflation that has eroded the country’s volatile currency.

An unprecedented move by the country’s central bank, the Reserve Bank of Zimbabwe, was announced on Monday to boost confidence in the local currency.

In the year Confidence in Zimbabwe’s currency has been low since people saw their savings wiped out by high inflation in 2008, at 5 billion percent, according to the IMF.

With strong memories of that terrible inflation, many Zimbabweans today choose to run the illegal market to earn a few US dollars for their savings at home or for daily shopping. Confidence in the Zimbabwean currency is so low that many retailers do not accept it.

The central bank on Monday gave 2,000 cents to commercial banks. Reserve Bank of Zimbabwe governor John Mangudia said the first batch of coins had been minted outside the country.

The coins can be used for purchases in shops, depending on whether the shop has enough change.

Zimbabwean economist Prosper Chitambara said, “The government is trying to adjust the very high demand for US dollars because this high demand does not match the supply.”

“The expectation … will also be modest in terms of the depreciation of the local currency, which should have some stabilizing effect in terms of commodity pricing,” he said.

Any individual or organization can buy the coins from authorized banks and deposit the coins or take them home, the country’s central bank said in an announcement. Foreigners can only buy the coins in foreign currency, the central bank said.

Called Mosi-oa-tunia, which means Victoria Falls in the local Tongan language, the coins will have “liquid asset status, that is, it will be easily convertible into money, and will be marketable both domestically and internationally.” The coin can be used for commercial purposes, the central bank said. Holders of the coins can trade them for cash after 180 days from the date of purchase, the bank said.

The coins weigh 22 carats in purity, one troy ounce each, and can be used as collateral for loans and credit facilities, the central bank said. The value of the coins in the international market is determined by the cost of producing one ounce of gold plus 5% of the coin. At Monday’s launch, Mosi Oa Tunia’s coin price was $1,824.

Globally, gold coins are used as a hedge against inflation and as an investment opportunity in countries such as China, South Africa and Australia, although not as much of a currency as Zimbabwe’s central bank thought, Chitambara said.

“For Zimbabwe, we are in chronic inflation so the expectation is that there will be a huge uptake of these gold coins,” he said. However, most Zimbabweans struggle with daily survival and cannot afford them, he said.

“There’s not much direct benefit to the common man from this, especially if you don’t have any extra money,” Chitambara said.

“Most people don’t have money for bread, let alone savings,” he said. Expectations indirectly benefit the common man by fixing the price.

Companies with excess cash can store the value of the coins and find them as an alternative investment asset, although individuals and companies “will continue to choose the dollar because it is convenient and very liquid,” he said.

Selling the coins in a rapidly depreciating local currency could also lead to “rent-seeking behavior, speculation and arbitrage in the economy,” as some may buy in local currency and later sell in dollars, he said.

Analysts say the central bank of Zimbabwe’s purchase of gold from iron ore producers, such as informal artisans, poses challenges and could lead to increased smuggling.

“Zimbabwe’s gold supplies have recovered significantly,” Morgan Securities said. & Co in Market Intelligence Report.

“However, if there is a difference between the US dollar used to buy the gold from the miners and the US dollar paid for the coins, this could squeeze the foreign exchange reserves of the central bank and its intermediaries. For gold miners, this could reduce the supply to Fidelity printers and increase gold smuggling activity,” said Morgan. According to a report, Fidelity Prints, a subsidiary of the central bank, is the only authorized gold in the country.

Zimbabwe has large gold reserves and exports of the precious metal are one of the South African country’s top foreign exchange earners. Gold production has increased to 30 tonnes in 2021, compared to 19 tonnes in 2020, according to the official figure. According to official statistics, small-scale producers, such as poorly regulated artisans, contributed 19 tons of gold by 2021.

Gold smuggling has been rampant. It is estimated that the country loses $100 million worth of gold every month through smuggling, according to Interior Minister Kazembe Kazembe. The smuggling trade is costing the country nearly 36 tons of gold a year, according to a report released this month by the Center for Natural Resources Management. Legally, all gold produced in Zimbabwe must be sold to the central bank, but many producers choose to export the gold in exchange for US dollars.