Zimbabwe needs US$100-million (R1.8-billion) of gold to kick-start its proposed bullion-backed digital currency, as the Southern African nation makes another attempt to stabilise its floundering dollar.

The central bank will rely on gold reserves, which it has been accumulating, to support the initiative and stem the local currency’s volatility, according to Persistence Gwanyanya, a member of the central bank’s monetary policy committee.

“Any amount around or less than $100-million will be able to deal with our challenge in a big way,” Gwanyanya said in an interview by phone on Monday from the capital, Harare. “We expect the central bank to bring a respectable quantity that can stabilise the Zimbabwe dollar and boost demand.”

Zimbabwe has been struggling to stem a decline in the currency in the nation where the US dollar is the unit of choice. The central bank has been building gold reserves as well as acquiring other precious minerals since the introduction of a policy last year that compels miners to pay part of their royalties in cash and metal. It’s banking on the stash to help it with the latest plan.

State-owned media reported earlier this month that the country had 350kg of gold in reserves, citing John Mangudya, the central bank governor.

Zimbabwe targets a 14% increase in gold production to 40t this year. It earned $377-million from gold production in the first quarter compared to $463-million a year ago, according to data provided by Fidelity Gold Refineries, the nation’s sole refinery.

The plan for a gold-backed digital currency was approved by the monetary policy committee last month. Zimbabwe introduced gold coins last June as a store of value and to help support the local unit.

‘Pretty straightforward’

The Reserve Bank of Zimbabwe is finalising a date to start the gold-backed digital currency, according to Innocent Matshe, the central bank’s deputy governor.

“It’s a concept which is pretty straightforward, we tokenise the gold, we have the gold,” he said by phone. “Every time we issue a coin, it is backed by real gold. We are still finalising the details, but most countries are asking us how we came up with that plan.”