Zimbabwe to print local ‘US dollar’ as cash crunch bites

Zimbabweans formed long queues outside banks on Thursday as a cash shortage prompted the government to announce plans to print a local version of the US dollar and limit withdrawals.

The government adopted US and South African currencies in 2009 after hyperinflation — which peaked at 231 million per cent — rendered the national currency unusable as the country’s economy collapsed.

A recent shortage of foreign notes led Reserve Bank Governor John Mangudya to unveil a raft of radical measures on Wednesday, including limiting withdrawals to $1,000 or 20,000 South African rand per day.

Bond coins were introduced in Zimbabwe in 2014 to tackle the problem of small change.

The new notes in denominations of $2, $5, $10 and $20 will play a similar role, acting as tokens.

They will be backed by a $200-million support facility provided by Afreximbank (Africa Export-Import Bank), the government said.

Economists blame the cash shortage on a trade deficit which saw the country’s import bills standing at $490 million in the first quarter against $167 million in exports.

Apart from limits on withdrawals, the amount of cash that can be taken out of the country per trip has been cut from $5,000 to $1,000.

In the queues outside the banks, tempers were running high.

In some cases, banks have limited the amount that can be taken out to $200 — well below the maximum set by the government.

Zimbabwe once removed 12 zeros from its battered currency at the height of hyper-inflation in 2009 when the largest note was the $100 trillion denomination.

State-sanctioned seizure of white-owned farms starting in 2000 left the agricultural sector in ruin, and triggered a sharp economic slowdown, with mass unemployment, emigration and many business closures.

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Source:Thehindu