FILE PHOTO: Zimbabwe's President Emmerson Mnangagwa arrives for the inauguration of Cyril Ramaphosa as South African president, at Loftus Versfeld stadium in Pretoria, South Africa, May 25, 2019. REUTERS/Siphiwe Sibeko/File Photo
Emmerson Mnangagwa, above, replaced Robert Mugabe as Zimbabwe's president in a 2017 coup © Reuters

Emmerson Mnangagwa’s government has reintroduced the Zimbabwean dollar a decade after it was destroyed by hyperinflation, abolishing the use of foreign currency as everyday money in an effort to fix dire shortages.

The US dollar and other currencies such as the South African rand that have been used by Zimbabweans for a decade “shall no longer be legal tender”, the government said in a statement released on Monday.

Instead, an interim currency known as the “RTGS dollar”, introduced this year and which has fallen sharply since, would become legal tender and trade as the Zimbabwean dollar.

Monday’s move “has all the hallmarks of a hastily concocted measure to stop the downward spiral of the RTGS dollar against other currencies”, Veritas, a civil rights watchdog, said. It may also contain legal loopholes allowing shopkeepers for example to continue charging US dollar prices, it said.

The resurrection of a currency that was once a byword for monetary debasement underlines how the southern African nation has struggled to leave economic turmoil behind since Mr Mnangagwa replaced Robert Mugabe as president in a 2017 coup.

The announcement shocked ordinary Zimbabweans and the country’s business community even though Mr Mnangagwa had said that he was seeking a new currency this year.

Zimbabwe has mostly used US dollars since its own dollar was withdrawn in 2009, after runaway money-printing and inflation of 500bn per cent under Mr Mugabe, who ruled for 37 years.

US dollars have, however, grown scarce in recent years as they were chased out of circulation by substitutes that were officially worth the same but had no backing.

The government this year floated the substitutes as the RTGS dollar, which has fallen more than 50 per cent on the black market.

According to Monday’s statement, the new Zimbabwe dollar would combine the mostly electronic RTGS dollar and so-called “bond notes” — paper money and coins that emerged during cash shortages — as the country’s sole legal tender.

Mr Mnangagwa’s ruling Zanu-PF party has been battling the extreme shortages of food, fuel and other goods since he took over from Mr Mugabe and promised to make the country “open for business”.

However, without sufficient US dollars to pay for imports, the country’s fuel stations have frequently run out and prices spiralled.

The fall in the RTGS dollar to 13 against the US dollar has hit salaries and driven inflation to double digits. Supermarkets have increasingly set prices in US dollars following the interim money’s collapse.

Botched elections and violence by security forces last year worsened Mr Mnangagwa’s isolation from international financial aid that might have helped resolve the crisis.

In a landmark deal with the IMF last month, the government agreed to stop borrowing money from the central bank to pay its bills, which was a root cause of the bad money.

In return the IMF is monitoring economic reforms for a year under a programme that Mr Mnangagwa’s government hopes will provide a seal of approval for eventual debt relief.

Companies are meant to trade RTGS dollars on an official market but it has had little take-up.

Analysts said that Monday’s change, which would spare foreign currency bank accounts, was a bid to force greater adoption of the RTGS dollar. They added that it threatens to backfire by sending use of the US dollar underground.

Letter in response to this article:

The Zimbabwean dollar insults a great nation / From Sipho Ndlovu, Middlesex, UK

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