Zim­babwe Plans New Cur­rency as Dol­lar Short­age Bites

THISDAY - - BUSINESS WORLD | NEWS -

Zim­babwe will in­tro­duce a new cur­rency in the next 12 months, the coun­try’s Fi­nance Min­is­ter said, as a short­age of United States dol­lars plunges the fi­nan­cial sys­tem into dis­ar­ray, forc­ing busi­nesses to close and threat­en­ing un­rest.

The south­ern African na­tion aban­doned its own hy­per­in­fla­tion-wrecked cur­rency in 2009 at the height of an eco­nomic re­ces­sion, adopt­ing the green­back and other cur­ren­cies in­clud­ing ster­ling and the South African rand. But with­out enough hard cur­rency to back up the $10 bil­lion of elec­tronic funds trapped in lo­cal bank ac­counts, busi­nesses and civil ser­vants are de­mand­ing pay­ment in cash which can be de­posited and used to make pay­ments both in­side and out­side the coun­try.

Ac­cord­ing to Reuters, Mthuli Ncube told a town­hall meet­ing on Fri­day that a new lo­cal cur­rency would be in­tro­duced in less than twelve months.

“On the is­sue of rais­ing enough for­eign cur­rency to in­tro­duce the new cur­rency, we are on our way al­ready, give us months, not years,” he said.

Zim­babwe cur­rently has less than two weeks im­port cover, ac­cord­ing to cen­tral bank data, and the gov­ern­ment has pre­vi­ously said it would only con­sider launch­ing a new cur­rency if it had at least six months of re­serves.

Lo­cals are haunted by mem­o­ries of the Zim­bab­wean dol­lar, which be­came worth­less as hy­per­in­fla­tion spi­ralled to reach 500 bil­lion per­cent in 2008, the high­est rate in the world for a coun­try not at war, wip­ing out pen­sions and sav­ings.

A sur­ro­gate bond note cur­rency in­tro­duced in 2016 to stem dol­lar short­ages has also col­lapsed in value.

Pres­i­dent Em­mer­son Mnan­gagwa is un­der pres­sure to re­vive the econ­omy but, in some­thing of a vi­cious cir­cle, the dol­lar short­ages are un­der­min­ing ef­forts to win back for­eign in­vestors side­lined un­der his pre­de­ces­sor Robert Mu­gabe.

With less than $400 mil­lion in ac­tual cash in Zim­babwe ac­cord­ing to cen­tral bank fig­ures, there are fuel short­ages and com­pa­nies are strug­gling to im­port raw ma­te­ri­als and equip­ment, forc­ing them to buy green­back notes on the black mar­ket at a pre­mium of up to 370 per­cent.

The Con­fed­er­a­tion of Zim­babwe In­dus­tries has warned some of its mem­bers could stop op­er­at­ing at the end of the month due to the dol­lar crunch.

Zim­babwe’s iconic man­u­fac­turer of cook­ing oil and soap, Olivine In­dus­tries said on Satur­day it had sus­pended pro­duc­tion and put work­ers on in­def­i­nite leave be­cause it owed for­eign sup­pli­ers $11 mil­lion.

A lo­cal as­so­ciate of global brew­ing gi­ant An­heuser-Busch In­bev said this week it would in­vest more than $120 mil­lion of div­i­dends and fees trapped in Zim­babwe into the cen­tral bank’s sav­ings bonds

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