Economists say Zimbabwe’s gold-backed digital token won’t solve currency problems.

Zimbabwe’s central bank recently issued a gold-backed digital token, which they hope will stabilize the country’s local currency. However, economists are skeptical that this will be effective. Zimbabwe has been struggling with hyperinflation for years, and experts believe that the real problem is the growth of money supply. The gold-backed digital token may offer short-term benefits, but it cannot reduce the amount of money circulating in the economy without strong macroeconomic policies in place. The RBZ hopes that the token will help address the demand for a store of value and reduce reliance on the U.S. dollar, but experts say that it cannot be the solution on its own. The token’s slow uptake is already an indication that it is powerless to tackle hyperinflation.

To address Zimbabwe’s local currency crisis, Chitambara and Paul suggest implementing sound policies. Paul emphasizes the importance of good macroeconomic management. Chitambara notes that the Reserve Bank of Zimbabwe (RBZ) has implemented restrictive monetary policy to reduce the amount of money in circulation while keeping fiscal policy expansionary. This has led to continued public spending despite the RBZ’s attempts to control the money supply. Chitambara argues that Zimbabwe’s gold-backed digital token won’t stabilize the local currency, as the solution is to control money supply growth. Last year, the RBZ announced plans to double spending but raised interest rates to 150% as a countermeasure. Some economists suggest abolishing the local currency entirely, but the government opposes this. The International Monetary Fund (IMF) is unsure about the effectiveness of the digital token initiative and requires more information to assess its efficacy. Chitambara’s solution is to “not spend what you don’t have.” Edited by Sandali Handagama.

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