Zimbabwe welcomes Yuans, Yens and Rupees to its complicated currency market, as trade with Asia intensifies amid an economic downturn
ZIMBABWE has adopted the Chinese Yuan, among a number of other foreign monetary units, into the fold of its multi-currency economy. The Reserve Bank of Zimbabwe also introduced the Japanese Yen, the Indian Rupee and the Australian Dollar as national legal currency at the end of January. The move is interpreted as part of an ongoing initiative to boost the country’s struggling economy, as Robert Mugabe’s government is fast running out of cash only six months following his highly-contested re-election.
Charity Dhliwayo, acting governor of the Reserve Bank of Zimbabwe, welcomed the move, saying that the decision is designed to ease foreign investment from the Far East: â€œTrade and investment ties between Zimbabwe, China, India, Japan and Australia have grown appreciably.” Chinese trade in Zimbabwe alone has exceeded USD 1 billion for the past two years and is forecast to continue at this rate, though it is unlikely that foreign investment in the country will turn the tide on this suffering economy.
President Robert Mugabe has been trying to strengthen trade with the East, following strained ties with European countries and the United States, especially after his recent announcement to ramp up the government’s seizing of businesses owned by the country’s white minority as well as by foreign investors as part of an ongoing ‘Economic Empowerment’ programme. But as unemployment reaches endemic levels and fears of widespread starvation hit headlines, Mugabe’s priorities appear to shift from his belligerent rhetoric to saving face – as well as pennies – wherever he can, despite claims of widespread corruption.
Up until fairly recent, it was easy to be a ‘billionaire’ in Zimbabwe. Owing to skyrocketing hyperinflation, the country even had to resort to issuing one hundred trillion Dollar banknotes towards the end of the currency’s continuation. In its 19-year existence, the Zimbabwean Dollar underwent one of the highest currency devaluations in the history of monetary transactions, with the original value of one Zimbabwean Dollar (from the currency’s first issuance date in 1980) being pegged close to 10 septillion Zimbabwean Dollars when the currency had to be ditched in 2009. That’s a ten with 25 zeros.
Due to its staggering rate of devaluation, the feeble currency had to be reissued twice during its existence, meaning that zeros had to be removed from banknotes and all financial transactions in order to simplify everyday trade and commerce; even with this in mind, people were dealing with trillions of Dollars on the streets of Harare every day, using brick-like stacks of bills usually bound together with string and transporting these in wheelbarrows across centres of commerce such as market places and high streets – leading to an inevitable financial collapse.
Once Zimbabwe’s own worthless currency was abandoned in a last-ditch attempt to save the country from martial law, international trade and investment, particularly from South-East Asia, began to grow in Zimbabwe, as bank accounts could now be opened in US Dollars. With the introduction of three other foreign currencies, banks and other financial institutions will have a mandate to provide transactions in all these various monetary denominations, starting to offer accounts in all the foreign currencies now available in Zimbabwe.
It is unsure how much the actual banknotes from these Asian countries will eventually circulate on the streets, as Zimbabweans have grown accustomed to using the South African Rand for daily transactions and reserving US Dollar bills for greater purchases. However, with the ongoing devaluation of the South African Rand, the new currencies might soon become street tender, as a the growing bartering industry in the country aids in further disintegrating its ailing economy.
Finance Minister Patrick Chinamasa predicted last December that a multi-currency system will remain in place in Zimbabwe for the foreseeable future, and that a return of the Zimbabwean Dollar might still be considered if the country’s economic liquidity stabilised notably. All things considered, amid fears of a renewed financial crisis in Zimbabwe, it is highly unlikely that we’ll ever see the day.
By Sertan Sanderson, 2014