- For 10 years, Zimbabwe used the US dollar and other foreign currencies after the Zimbabwean currency was dogged by hyperinflation.
Zimbabwean President Emmerson Mnangagwa on Tuesday praised the reintroduction of the Zimbabwean dollar as the only legal tender in the troubled country.
Mnangagwa said it is the right time to scrap the use of foreign currencies, saying Zimbabwe’s economy is “now functional” enough to adopt the usage of a single, local currency.
“We were living in an abnormal situation. We should actually be congratulated for taking this step,” he told reporters at a press conference on the sidelines of a wildlife summit in the resort town of Victoria Falls.
“What we have done is we have gone back to normalcy,” he said. “Normalcy is that the country must have its own currency.”
Mnangagwa said the possession of foreign currency is not outlawed, but people will not be able to use it to buy items locally.
Finance Minister Mthuli Ncube announced on Monday that the Zimbabwean dollar is the only legal tender. Prior to Ncube’s notification, Zimbabweans were using a multi-currency system dominated by the US dollar after dropping its own currency in 2009.
Zimbabwe then introduced a local currency called a bond note in 2016 to trade alongside the dollar, the pound sterling, the South African rand and other currencies. This bond has now become the Zimbabwean dollar.
Most businesses and residents of Zimbabwe do not yet fully understand this change, as they mostly use US dollars to avoid the rapid devaluation of the local bond.
Most traders have indexed their prices to the dollar, which has resulted in local currency price movements of up to several times a day in response to rising black market rates.
With banks experiencing widespread shortages of cash, businesses have been forced to resort to the illegal street market to get foreign currency in order to restock. Zimbabwe’s industry has been in the doldrums for more than a decade and the country imports most basic items.
Inflation is close to 98%, according to official figures, the highest since the 2009 collapse of the local currency.
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