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ZEGU Economics Lecturer Lists Conditions For Gold Coins To Stabilise The Economy

Courage Masona, an economist and lecturer at the Zimbabwe Ezekiel Guti University (ZEGU) has said that the recently-introduced Mosi-oa-Tunya gold coins curb the runaway inflation in Zimbabwe if certain conditions are met.

He speaks as analysts are contradicting each on the subject matter. Below are the conditions he highlighted in an article posted in the Opinion column of The Standard that was published this Sunday:

i). there is a certain level of creativity required at the apex bank, to close every arbitrage opportunity.

ii). the gold coins must be convenient to use and very liquid as well. They must not just perform the store of value function of a currency but also work as a medium of exchange.

iii) the governor faces a formidable task each day to try and manage the money supply, at a time when elections are fast approaching. It is during this time that economies experience political business cycles. A restrictive monetary policy is always desirable in an economy with too much liquidity.

iv). there is a need to boost public confidence and trust in the economy if gold coins are to succeed.

Zimbabwe introduced the coins on 25 July in a bid to stabilise the economy by easing demand for US dollars and storing the value of money after the Zimbabwe dollar lost more than two-thirds of its value against the USD this year.

In the first week, RBZ sold 1 500 gold coins during the first week of their release into the market.

Internationally, gold coins are used in countries such as China, America, Canada and Australia among others.

These other countries, however, unlike Zimbabwe, have relatively stable macroeconomic environments.

Masona also said it is difficult for one to predict the outcomes of a policy with precision hence the need for fellow economists to resist the “pretence of exact knowledge” in economic analysis.

He added that no economics model would ever render fully intelligible the causes of market outcomes or the consequences of government policies.

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