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New Wave: Zimbabwe Abolishes Local US Transactions

Harare - It is now official. After almost a decade of using a multi-currency basket system, Zimbabwe has reverted back to its own currency....

Harare - It is now official. After almost a decade of using a multi-currency basket system, Zimbabwe has reverted back to its own currency. 

This means, it is illegal to transact locally using any other denomination. The logic, according to the government is to 'enhance the affordability of goods and services by the majority'.

Finance Minister Professor Mthuli Ncube revealed the decision was taken after the greenback had taken over as the means of payment in most transactions, thereby disadvantaging those earning the local currency.

“Basically, we have made another step forward by moving away from a multi-currency regime to a mono-currency regime where the domestic currency (Zimbabwe dollar) is now the sole legal tender for transactions within Zimbabwe,” said Prof Ncube.

“What was happening out there in the market was that the market was choosing a mono-currency, being the US dollar, and that is untenable because we do not control the sourcing of it (and) the supply of it. We cannot even conduct monetary policy on the back of it.”
Zimbabwe has Abolished Muti-Currency System in Place Since 2009

Recently, President Emmerson Mnangagwa hinted on the return of the Zimbabwe dollar by 2020. “As a country we must have our currency by the end of this year, we have started that journey,” Mnangagwa said recently.

Prof Ncube said using the Zimdollar would make it easier to transact on the domestic market with forex reserved for external payments.

“We also know that in some quarters we were not even allowed to transact in US dollars because of things like sanctions and other restrictions. So, it’s necessary to move on and use a currency that you can control.

“And also, what we are trying to do is restore full monetary policy where the Central Bank can conduct monetary policy using the array of tools that are necessary for managing monetary policy such as interest rates, use of a monetary policy committee to govern things like targeting money balances or even targeting inflation,” he said.

Prof Ncube said people will use the existing RTGS dollar, bond notes and bond coins, which means “nothing changes really. What changes is the name of the currency (to Zimbabwe dollar) plus the fact that it is now the only legal tender in Zimbabwe,” he said.

“Basically, the multi-currency regime, which had by the way become a mono-currency in favour of the US dollar, was favouring those with access to US dollars; those with access to US dollars were facing no change in inflation at all for the last three years.

“So we were now creating a society of haves and have-nots; those who have access to US dollars and those who don’t. Those who don’t are faced with RTGS inflation while those who have US dollars are faced with zero inflation.”

In January Ncube said Zimbabwe would have its own currency in the next coming year.

Through Statutory Instrument (SI) 142 of 2019, known as Reserve Bank of Zimbabwe (Legal Tender) Regulations, Government abolished the use of multiple currencies such as British pound, United States dollar, South African rand, and Botswana Pula, among others.

Zimbabwe had used a basket of currencies since 2009. The Zimbabwe dollar became the sole legal tender with effect from yesterday.

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