For Zimbabwe\u2019s government, the reintroduction of the national currency a decade after its demise is a return to \u201cnormalcy.\u201d<\/p>\n
For most of the country\u2019s citizens, it\u2019s a bitter reminder of years of hyperinflation, which destroyed their savings and left them bartering for daily basics.<\/p>\n
\u201cRemember 2008, when you needed trillions of dollars to buy bread? In Zimbabwe time goes backward,\u201d said Edwin Mapondera, 34, who sells wooden sculptures in the affluent northern suburbs of the capital, Harare. \u201cI\u2019m taking any currency people have and not listening to this nonsense because now the famous Zimbabwe dollar is going to become worthless in no time.\u201d<\/p>\n
Tanking Economy Snaps Zimbabwe Dream Of Post-Mugabe Revival
\nPeople queue outside a foreign currency exchange and money transfer outlet in Harare.Photographer: Cynthia R Matonhodze\/Bloomberg The Reserve Bank of Zimbabwe said Monday that, starting immediately, currencies such as the U.S. dollar and South African rand would no longer be legal tender. Instead, a quasi-currency known as bond notes, which can\u2019t be traded outside the country, and their electronic equivalent, the RTGS$, will be termed the Zimbabwe dollar.<\/p>\n
By reintroducing it, the government is taking the risk that more people will be driven into the black market, further starving the economy of already insufficient state revenue. That could leave the state struggling to pay government workers, who account for about 90% of its budget, and with little money to shore up creaking infrastructure.<\/p>\n
Effects still linger from the last time the Zimbabwe dollar crashed and burned, transforming one of Africa\u2019s most developed nations into a place where gasoline and bread are periodically unavailable, almost everyone is unemployed and a quarter of the population has emigrated. Just two blocks from the country\u2019s premier Meikles Hotel, what was once a neat and active bus terminal is overrun by hundreds of vendors selling everything from vegetables to spanners.<\/p>\n
The 2008 catastrophe began after then-President Robert Mugabe began backing the seizure of white-owned commercial farms around the turn of the century. The farms\u2019 new owners failed to produce, exports plummeted and the national currency rapidly lost its value. Then the central bank turned on the printing presses in a bid to meet the government\u2019s running costs.<\/p>\n
A Zimbabwe One Hundred Trillion Dollar Note
\nA 100 trillion dollar Zimbabwe note.Photographer: Daniel Acker\/Bloomberg
\nWithin eight years inflation reached 500 billion% and the largest bank note was 100 trillion Zimbabwe dollars. Foreign currencies became legal tender in 2009. That initially stabilized the economy, but the strength of the dollar also made Zimbabwean manufacturing companies uncompetitive against lower-cost South African rivals.<\/p>\n
In November 2017, Mugabe was ousted and replaced by Emmerson Mnangagwa. The new president pledged that Zimbabwe was \u201copen for business,\u201d but failed to address currency shortages and stagflation. The resulting lack of investment and scarce hard currency left people lining up outside banks. Nor can the government pay for essential imports such as gasoline and wheat.<\/p>\n
The new Zimbabwe dollar is falling faster than its digital predecessor
\nIn February, under the urging of Finance Minister Mthuli Ncube, the central bank did away with the insistence that bond notes and the RTGS$ trade on par with the U.S. currency and instead created an interbankmarket. Despite this week\u2019s announcement, the RTGS$ has continued its decline. It traded at 13.50 to the dollar Tuesday, according to data compiled by Bloomberg, bringing its fall this quarter to 69%.<\/p>\n
\u201cThe market was self-U.S. dollarizing,\u201d Ncube, an economist who has lectured at the University of Oxford, said in a video posted on Twitter. \u201cIt was uncontrollable and we felt that we needed to bring the situation under control.\u201d<\/p>\n
\u201cToday marks the end of the multi-currency regime and the adoption of a mono-currency regime in favour of a domestic currency\u201d \u2013 Minister @MthuliNcubepic.twitter.com\/czLNnAVqN4<\/p>\n
\u2014 Ministry of Information, Publicity & Broadcasting (@InfoMinZW) June 24, 2019
\nOrdinary Zimbabweans have seen at least three rounds of fuel price hikes this year, and the cost of other goods such as bread and beer have risen markedly. Inflation, officially at almost 100%, is much higher if black-market rates are used.<\/p>\n
\u201cThis is going to cause widespread panic among a highly sensitive consumer base, which could provoke social unrest,\u201d Jee-A van der Linde, an analyst at NKC African Economics in Paarl, South Africa, said in a note to clients. \u201cThe country simply does not have the foreign reserves required to back its own currency. Moreover, there is nothing that stands in the way of the RBZ to create more money.\u201d<\/p>\n
Zimbabwean President Emmerson Mnangagwa Interview
\nEmmerson MnangagwaPhotographer: Waldo Swiegers\/Bloomberg
\nThat sentiment is echoed by Zimbabwe\u2019s business sector.<\/p>\n
The central bank must \u201cexercise restraint and prudence with the printing machine,\u201d said Denford Mutashu, president of the Confederation of Zimbabwean Retailers. The Chamber of Mines of Zimbabwe said its members want to know if they will still be paid for their gold in the foreign currency they need to pay for essential imports.<\/p>\n
But the government\u2019s biggest challenge may be avoiding a repeat of the unrest it saw in January when streets protests, led by labor unions, erupted after the fuel price was more than doubled overnight. At least 17 people died in the ensuing crackdown by security forces.<\/p>\n
This decision \u201cdestroys whatever little confidence what was left,\u201d said Peter Mutasa, president of the Zimbabwe Congress of Trade Unions. \u201cAs workers we reserve the right to do whatever is right for us and we will decide the way forward on how best we proceed.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
For Zimbabwe\u2019s government, the reintroduction of the national currency a decade after its demise is a return to \u201cnormalcy.\u201d For most of the country\u2019s citizens, it\u2019s a bitter reminder of years of hyperinflation, which destroyed their savings and left them bartering for daily basics. \u201cRemember 2008, when you needed trillions of dollars to buy bread? […]<\/p>\n","protected":false},"author":84,"featured_media":897,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,6],"tags":[249,83,653,371],"class_list":{"0":"post-10574","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-all-news","8":"category-economy","9":"tag-currency","10":"tag-economy","11":"tag-rbz","12":"tag-rtgs"},"yoast_head":"\n