Riyaz Patel
Zimbabwe’s central bank will introduce some notes and coins in the Zimbabwe dollar currency in the next two weeks, the latest step towards restoring the domestic currency, central bank governor John Mangudya said Tuesday.
The new money, consisting of 5 dollar notes and 2 dollar coins, will be introduced gradually to avoid driving up inflation, Mangudya said. It will circulate alongside the bond notes and coins introduced in 2016 as a surrogate for US dollars, which the country was then mainly using in lieu of its own currency.
The central bank unexpectedly reintroduced the Zimbabwe dollar on June 24, ending a decade of dollarisation. Zimbabwe had abandoned its own currency in 2009 after it was wrecked by hyperinflation.
“We thought of being conservative (in introducing low denomination notes and coins) and we will graduate with time,” Mangudya said following a two-day monetary policy committee meeting.
Gift Mugano, an economics professor at Zimbabwe Ezekiel Guti University, told Al Jazeera that the introduction of the currency will accelerate its own value decline.
The new currency will have the same value as the bond note and RTGS dollars circulating in the economy.
“This is a continuation of a process that started on 24 June when the central bank outlawed the use of the US dollar and introduced a new currency,” Mugano said. “What is important to note is that they did this when economic fundamentals were very weak. The fundamentals have not improved as we speak.
“The central bank doesn’t have the reserves to back the value of the currency and has only a month’s import cover at best. It’s going to be difficult to maintain the value of the currency.”
Zimbabwe is grappling with the worst economic crisis in a decade, marked by shortages of foreign exchange, fuel and medicines, three-digit inflation and daily power cuts.
Additional reporting by Reuters and AlJazeera
