Zim­babwe plans new cur­rency as dol­lar short­age bites

Oman Daily Observer - - BUSINESS -

HARARE: Zim­babwe will in­tro­duce a new cur­rency in the next 12 months, the fi­nance min­is­ter said, as a short­age of US dol­lars has plunged the fi­nan­cial sys­tem into dis­ar­ray and forced busi­nesses to close.

In the past two months, the south­ern African na­tion has suf­fered acute short­ages of im­ported goods, in­clud­ing fuel whose price was in­creased by 150 per cent on Satur­day.

Zim­babwe aban­doned its own cur­rency in 2009 after it was wrecked by hy­per­in­fla­tion and adopted the green­back and other cur­ren­cies, such as ster­ling and the South African rand.

But there is not enough hard cur­rency in the coun­try to back up the $10 bil­lion of elec­tronic funds trapped in lo­cal bank ac­counts, prompt­ing de­mands from busi­nesses and civil ser­vants for cash which can be de­posited and used to make pay­ments.

Fi­nance Min­is­ter Mthuli Ncube told a town hall meet­ing on Fri­day a new lo­cal cur­rency would be in­tro­duced in less than 12 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’s for­eign re­serves now pro­vide less than two weeks cover for im­ports, cen­tral bank data show. 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 in­fla­tion spi­ralled to reach 500 bil­lion per cent 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 dol­lar short­ages are un­der­min­ing ef­forts to win back for­eign in­vestors side­lined un­der his pre­de­ces­sor Robert Mu­gabe.

Mnan­gagwa told re­porters on Satur­day that the price of petrol had in­creased to $3.31 per litre from $1.32 from mid­night but there would be no in­crease for for­eign em­bassies and tourists pay­ing in cash US dol­lars.

Lo­cals can pay via lo­cal debit cards, mo­bile phone pay­ments and a sur­ro­gate bond note cur­rency.

With less than $400 mil­lion in ac­tual cash in Zim­babwe ac­cord­ing to cen­tral bank fig­ures, fuel short­ages have wors­ened 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 per cent.

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.

Cook­ing oil and soap maker 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.

Peo­ple queue to with­draw US dol­lars from a money trans­fer shop in Harare, Zim­babwe. — Reuters

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