IMF warns Zimbabwe against issuing gold-backed digital currency

The institution called on the authorities of the South African country to use traditional measures to solve economic problems

09.05.2023 - 16:30

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The International Monetary Fund cautioned Zimbabwe against adopting a gold-backed digital currency to deal with macroeconomic challenges like volatility in the local unit, saying it should rather liberalize its foreign-exchange market.

The central bank started selling digital tokens to investors on Monday for a minimum price of $10 for individuals and $5,000 for corporates and other entities, as part of efforts to reduce demand for US dollars that now supersede the local unit as the preferred currency for transactions. The token will later also be used for transactions.

“A careful assessment should be conducted to ensure the benefits from this measure outweigh the costs and potential risks including, for instance, macroeconomic and financial stability risks, legal and operational risks, governance risks, cost of forgone FX reserves,” an IMF spokesperson said Tuesday in an emailed response to questions.

The Washington-based lender urged authorities in the southern African nation to rather use conventional measures to address economic challenges. Those measures include maintaining a tight monetary-policy stance and accelerating the liberalization of the foreign-currency market by removing restrictions on the exchange rate at which banks, authorized dealers, and businesses transact, it said.

The Zimbabwean dollar has depreciated 40% against the greenback this year to trade at 1,070 on the official market and between 1,500 to 2,300 on the parallel market.

The IMF last year also raised issue with the Central African Republic’s adoption of Bitcoin as legal tender. A decision the nation reversed a year later.

This material is taken from the website https://www.bloomberg.com.

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