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Why Zim has banned foreign currencies

HARARE – Zimbabwe’s government has taken the controversial decision to ban local trading in foreign currencies, including the US dollar, with immediate effect.

It has also reintroduced the Zimbabwe dollar, which was abandoned because of hyperinflation in 2009 when the country mainly adopted the US dollar and the South African rand.

The move has shocked Zimbabweans, who have little faith in a local currency – the exchange rate when the Zimbabwe dollar was scrapped was Z$35 quadrillion to $1.

What has prompted the move?

The economy is a mess. Nearly everything is imported and there is a shortage of physical cash. The cost of living is very expensive. Unemployment is widespread.

Various things have been tried to solve the problem, including the introduction in 2016 of bond notes, a parallel currency that was only accepted in Zimbabwe.

It was officially pegged to the US dollar but in reality was worth much less – so a thriving black market developed and Zimbabwe has become a cashless society, relying on card-based transactions or trading with mobile money.

In February, bond notes and electronic cash were re-branded RTGS dollars and allowed to float to try and crush the black market.

However, workers, who used to get their salaries paid in US dollars, have found that their salaries in RTGS dollars are not able to keep up with inflation – now running at 100%.

People were often expected to pay for goods in shops and services, like doctors’ fees, in US dollars.

SOURCE: BBC News

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