Zimbabwe shelves re-introduction of local currency

Zimbabwe on map
Zimbabwe on map

Zimbabwe’s Central Bank governor, John Mangudya, said on Wednesday the country was not ready to re-introduce local currency until economic fundamentals improved.

Mr. Mangudya told reporters in Harare that the country would keep on using foreign currencies that replaced its local unit until a sustainable budget and higher business confidence were attained.

The southern African nation switched to U.S. dollar and South African rand eight years ago after the Reserve Bank of Zimbabwe printed so much of the local currency in 2007 and 2008.

The printing triggered off inflation which hit an annual rate of almost 500 per cent, rendering its own currency worthless.

Mr. Mangudya told reporters that the multicurrency system was here to stay up until the fundamentals of the local currency had been achieved.

“These include one year import cover, a sustainable government budget (and) demonstration that consumer and business confidence is right,” he said.

Mr. Mangudya said inflation, which stood at 0.31 per cent year-on-year in June, was expected to rise to between 2 and 3 per cent by the end of 2017.

He said Harare was negotiating with Cairo-based Afran Export and Import Bank (Afreximbank) for a $300 million facility to pay incentives to exporters.

The money would be paid out as bond notes, he said.

The spectre of more bond notes, which would total $500 million after an initial $200 million last year, has stoked fears the country could return to the era of money printing and hyperinflation.

Zimbabwe has experienced a shortage of dollars since early last year, leading to delays in foreign payments, even after the central bank introduced a “bond notes” surrogate currency last November.

Pricing and all transactions in Zimbabwe are now denominated in dollars. Rand transactions make up less than 5 per cent of the total under the system.

(Reuters/NAN)


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