Zimbabwe is set to introduce a gold-backed digital currency to be used as legal tender within the country with the aim of stabilising the local currency.

The introduction of the digital currency by the Reserve Bank of Zimbabwe (RBZ) will be the first step towards using Zimbabwe’s gold reserves to anchor the Zimbabwe Dollar, said central bank governor, John Mangudya, Sunday Mail reports.

The tokens will help to ensure citizens with low amounts of local currency can purchase the gold units “so that we leave no one and no place behind,” Mangudya stated.

Zimbabwe introduced gold coins to stabilise the local currency last year. As it stands, Zimbabwe’s currency currently trades at Z$1,000.4 against the Dollar but is typically exchanged for Z$1,750 on the streets of the capital, reports Bloomberg.

The RBZ governor stated that exchange rate volatility stemmed from expectations of elevated foreign currency supply in the market when the tobacco auction season got underway last month.

Up to now, since the season started, Zimbabwe has exported 54.9 million kilograms of tobacco valued at $307 million. During the same time last year, 57 million kilograms were exported, valued at $295.5 million, News 24 reports.

“The movements in the parallel market rate are mainly because of the expectations of increased foreign currency supply in the market when the tobacco marketing season opened,” Mangudya stated.

“However, the supply of foreign currency over the past three weeks has been lower than expected. That expectation raised the rates because people thought there will be more money in the market.

“With the start of the tobacco marketing season, most of the funds have been going towards servicing tobacco contractors’ obligations. Now, the money will start flowing into accounts of the growers themselves end of this month; that is when most of them will start receiving their US Dollar portions, the central bank governor added.

Zimbabwe abandoned its currency back in 2009, replacing it predominantly with USD. Yet the Zimbabwe Dollar was reintroduced in 2019 in an attempt to revive the economy, but in June, the government decided to make the US Dollar legal tender once again to try and curb soaring price hikes.