Whoever thought that Europe or US is suffering from high inflation has not yet looked at Zimbabwe. The African country recorded an inflation rate of almost 192% in June. As a result, Zimbabweans have to resort to other means to avoid this inflation.
The Mosi-oa-tunya currency
While bitcoin may be a means of reducing the burden of inflation, Zimbabwe’s central bank is reaching for an alternative.
Indeed, the bank said it will begin selling gold coins this month. These will also be given a distinct name: “Mosi-oa-tunya” coins.
The governor of the central bank, John Mangudya, said according to Reuters that the Mosi-oa-tunya coins will be on sale from July 25. For this, Zimbabweans can use local currency, U.S. dollars, and some other currencies.
The coin contains an approximately 31 grams of gold, and its purpose is to use it as a “store of value”. With this, the bank hopes to curb the 192% inflation rate. The new currency will be converted into cash and traded locally and internationally.
Interest rate with two zeros
In addition to the gold coin, the government is also trying other means to combat inflation. One of these means is to increase the interest rate, but ideally it should be higher than the inflation rate of 192%.
That is why Zimbabwe more than doubled its policy interest rate last week, raising it from 80% to 200%. In addition, there are also plans to make the U.S. dollar a legal tender for the next five years, and that won’t be the first time.
U.S. dollar or bitcoin?
Zimbabwe dropped its own currency back in 2009 – also due to high inflation. The alternative at the time was already the US dollar. The country then adopted it as legal tender not for 5 years, but for a period of 10 years. The government reintroduced their local currency in 2019, but it quickly lost its value.
Another alternative, of course, could be bitcoin, but for now there are no plans for that. Meanwhile, the Central African Republic does use bitcoin as legal tender.
But whether this is a success remains to be seen. Perhaps it is a good alternative for Zimbabwe, though, since 192% inflation is worse than bitcoin’s declines.