Zimbabwe Wrangles with Inflation & the IMF’s Advice

As Zimbabwe fights inflation, its gold coin continues to hold value, rising to $2,016.79 as of January 25, 2023, according to the Reserve Bank of Zimbabwe. Their gold coin, known as the Mosi-oa-Tunya, has more than held its value. Initially issued at a price of $1,823.80 on July 24, 2022, it has risen to $2,016.79 on January 25, 2023.

Meanwhile, inflation rapidly erodes Zimbabwe’s national currency. Zimbabwe’s annual inflation rate at the end of 2022 was 243.8% according to trading economics.

So far, Zimbabwe’s gold coin has a track record as a solid store of value during this era of hyperinflation. Yet the IMF objects to Zimbabwe’s use of the gold coin:

…restoring the effectiveness of monetary policy, including through the use of appropriate interest-bearing instruments to mop up liquidity and winding down the use of gold coins; and maintaining a prudent fiscal stance.

IMF

At the same time, the IMF is one of the largest holders of gold. From their page titled, “Gold and the IMF”:

Gold played a central role in the international monetary system in past centuries when currency rates were linked to the price of gold. The fixed currency system ended in 1973, diminishing gold’s role. However, gold remains an important reserve asset and the IMF is one of the world’s largest official holders of gold.

IMF

So far, Zimbabwe’s gold coin is working as a store of value in a hyperinflationary environment. However, the fight with inflation and perhaps the IMF is far from settled.

Here is a resource discussing some of the items to consider if you are thinking about investing in gold.

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