Zimbabwe adds new currencies to ease liquidity crisis
Wednesday, 5 February 2014 00:01
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Zimbabwe’s Central Bank announced last week that it would allow more currencies, including the Japanese yen, Chinese yuan, Indian rupee and Australian dollar, to circulate to ease a liquidity crunch.
Zimbabwe abandoned its own money in 2009 after hyperinflation rendered it worthless and adopted foreign currencies such as the US dollar and South Africa’s rand.
“In addition to opening accounts denominated in Botswana Pula, British Sterling, South African Rand and USDollar, cooperates and individuals, can also open accounts denominated in the Australian Dollar, Chinese Yuan, Indian Rupee and the Japanese Yen,” said Acting Central Bank Governor Charity Dhliwayo.
Soon after elections last year, Zimbabweans feared a reintroduction of the Zimbabwe dollar, a possibility alluded to by re-elected President Robert Mugabe and senior ZANU-PF officials, who called the 2009 move to the US currency a “strategic retreat”.
However, the Reserve Bank said the local currency would not be introduced anytime soon, adding that when it is adopted, the local unit would circulate alongside the greenback and South African rand.
Some analysts say the introduction of new currencies could cause cash shortages and fluctuating exchange rates in an already difficult economy.
“By introducing a basket of currency it will not be necessarily a solution to solving the liquidity crunch, as you know that currency introduction will not be easier to use as an implementation measure, currency can only be meaningful when the economy is in a good shape, and with the current economic situation in Zimbabwe its quite difficult with the introduction of four other currencies to make a difference in terms of revival of the market itself,” said economic analyst Christopher Mugaga.
Zimbabwe’s economy is expected to grow 6.1% this year from 3.4% last year on the back of rising revenues, the Finance Minister Patrick Chinamasa said in November.
The southern African country is experiencing an economic slow-down on the back of a decline in agriculture output and jitters surrounding the re-election of Mugabe in July last year.
On the streets, many hope the introduction of the new currencies can increase their buying power.
“It’s commendable what the government has done so far, but what is needed is more money in people’s hands so that they can spend on groceries and services that are available,” said Harare resident Charles Saki.
Mugabe has promised to rebuild the economy, which is still struggling to right itself after a decade-long crisis.
