The International Monetary Fund (IMF) has warned Zimbabwe not to adopt a gold-backed digital currency to deal with macroeconomic challenges such as local currency volatility, saying it should instead liberalize its foreign exchange market.
Zimbabwe Central Bank Launched Gold Backed Digital Currency to End US Dollar Domination in the Country
The country’s central bank began selling digital tokens to investors on Monday for a minimum of $10 for individuals and $5,000 for companies and other entities, as part of efforts to curb demand for the US dollar, which is replacing the local currency as the preferred currency for transactions. The token will then be used for transactions as well.
An IMF spokesperson replied to questions by email on Tuesday, “The benefits to be derived from this measure; “A careful assessment must be made to ensure that it outweighs the cost and potential risks, such as macroeconomic and financial stability risks, legal and operational risks, management risks, cost of lost foreign exchange reserves.”
The IMF urged Zimbabwean officials to use traditional measures to overcome economic difficulties.
These measures include maintaining a tight monetary policy stance and accelerating the liberalization of the foreign exchange market by removing restrictions on the exchange rate at which banks, dealers and businesses transact.
The Zimbabwean dollar has lost 40% of its value against the dollar this year, trading between 1,070 in the official market and between 1,500 and 2,300 in the alternative market.
*Not investment advice.
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