HARARE (Commodity Online): Is Zimbabwe, the country with 1,00,000 per cent inflation, going the gold way? It seems so, if the Zimbabwe Central bank’s move to make its currency gold-based is any indication.

The bank proposed the introduction of a gold-backed local currency, which was destroyed by hyperinflation and replaced by multiple foreign currencies in January.

The government introduced multiple foreign currencies to stop sky-rocketing inflation and revive the economy earlier this year.

The shortage of foreign currencies in the country was hurting economic recovery efforts, said the Central bank.

The bank batted for re-introduction of the Zimbabwe dollar to ease the liquidity crunch.

It favoured a guarded reintroduction of the Zimbabwe dollar where such a new currency will be fully backed by credible, tangible and locally available assets, such as gold, diamonds or platinum, among several other possibilities.

Zimbabwe’s inflation has tumbled from an official annual rate of 231m% in July 2008 -- which independent analysts say was understated -- to a monthly rate of 1% in July 2009 following the decision to abandon the local currency.

But the unity government, which says it needs at least $8.3 billion for reconstruction, has so far failed to attract anticipated foreign financial aid, with Western donors demanding broad economic and political reforms.