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Mnangagwa returns to (his) gold standard

After an investigation into widespread gold smuggling by officials, the government launches a bullion-backed digital currency

Several key sources in Al Jazeera's lengthy investigation into gold smuggling by officials in Zimbabwe claimed business links to President Emmerson Mnangagwa and his wife Auxilia.

Prompted by public outrage at the tens of millions of dollars of lost revenue from the gold smuggled to the United Arab Emirates, Mnangagwa belatedly announced an investigation into Al Jazeera's findings although his own officials had rubbished the investigation.

Weeks later, Mnangagwa launched his plan to use US$100 million of gold to finance the government's bullion-backed digital currency.

Since the introduction of the digital currency, designed to cut inflation and bolster the Zimbabwe dollar, the Reserve Bank of Zimbabwe (RBZ) has already sold gold-backed digital tokens equivalent to 313.9kg of gold.

The digital tokens can be transferred between people and businesses as a form of payment and are projected to stabilise the Zimbabwean dollar.

Bankers and others have criticised the move. The IMF has warned that introducing gold coins could dangerously deplete Zimbabwe's reserves (AC Vol 63 No 20, ZANU-PF beats its economic chest).

The central bank says that it has been building its gold reserves after introducing a policy last year that compels miners to pay part of their royalties in cash and metal.

State-owned media reported that in April the RBZ had 350kg of gold in reserves valued at $22.80m, with a view to increasing those reserves to around $100m though it has not set a clear date for this target.

The bank also introduced gold coins to the market last June to help soak up Zimbabwean dollars, and support the currency's strength.

The gold rush is old fashioned method of currency support and could be hampered by the gold trafficking networks revealed by the Al Jazeera investigation which implicated top government officials (AC Vol 64 No 8, After the gold rush).

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