/ 20 August 2009

Zim state bank boss calls for gold-backed currency

Zimbabwe’s central bank governor on Thursday proposed bringing back the worthless local currency and ensuring its value by backing it with gold, an idea quickly rejected by the finance minister.

The government abandoned the Zimbabwe dollar in January and now uses foreign currency, after a decade of hyperinflation estimated in multiples of billions left the local unit worthless.

”What I am calling for is the guarded reintroduction of the Zimbabwe dollar where such new currency will be fully backed by credible, tangible and locally available assets, such as gold, diamond or platinum,” Reserve Bank chief Gideon Gono wrote in the state-run Herald newspaper.

The loss of the local currency has sharply eroded Gono’s influence, and he has repeatedly tried to reassert himself by calling for the return of the Zimbabwe dollar, which went into freefall during his five years in office.

Finance Minister Tendai Biti quickly shot down the proposal, simply telling reporters: ”The Zim dollar is dead and buried.”

Gono’s stewardship of the Reserve Bank is one of the main battles within Zimbabwe’s six-month-old unity government between long-ruling President Robert Mugabe and his erstwhile rival Prime Minister Morgan Tsvangirai.

Mugabe unilaterally appointed Gono to a new five-year term after the unity accord was signed, but before the government had taken office.

Biti, the top aide to Tsvangirai, has often feuded publicly with Gono, who enjoys strong support from Mugabe.

Mugabe has also called for the return of the Zimbabwe dollar, saying poor Zimbabweans have no access to foreign currency. — Sapa-AFP