Zimbabwe has brought back its own currency, the Zimbabwe dollar, just over a decade after its usefulness was destroyed by hyperinflation.
In regulations published Monday by the Reserve Bank of Zimbabwe the country said that currencies including the US dollar and the South African rand, in use since 2009, will no longer be accepted as legal tender. A local quasi currency, bond notes, that was introduced in 2016 but can’t trade outside the country, and their electronic equivalent, the RTGS dollar, will now be known as the Zimbabwe dollar.
Zimbabwe abandoned the Zimbabwe dollar after inflation reached an estimated 500 billion percent in 2008, according to the International Monetary Fund. While the country has since used a basket of currencies from the continent and abroad as well as bond notes and the RTGS$, some government departments and agencies have until recently demanded payment in the greenback.
The central bank made it clear in its announcement that money held in foreign-currency accounts will not be affected, but the step will be greeted with alarm and memories of the lives wrecked and pensions and savings lost in 2008. Recollections of what effectively became a barter economy in a country where a suitcase full of bank notes was needed to purchase a pair of jeans will be hard to erase.
“Any attempt by the officials to bring a new currency would require confidence,” said Jee-A van der Linde, an economist at NKC African Economics in Paarl, South Africa. “People aren’t sure that there’s something backing the currency. There’s no way that something like this will be maintained. People will not trust the currency. It will promote more off-market activity even more if that’s possible.”
Zimbabwe’s official currency trades at a discount on the street. In February the central bank introduced the RTGS$ and said it and bond notes would no longer be pegged to the US currency. This precipitated a rapid depreciation in both the newly introduced interbank rate and the black-market value. Inflation, at 97.9%, is now at its highest since at least 2008.
This “will worsen the situation,” said Christopher Mugaga, the chief executive officer of the Zimbabwe National Chamber of Commerce. Companies “with real dollars will simply go underground,” he said.
–With assistance from Godfrey Marawanyika.