HARARE- Zimbabwe is set to introduce a new currency within days, former Finance Minister Tendai Biti claimed on Monday.
“The regime will this week introduce a new Zimbabwe currency not backed by any reserves and without the context of structural reforms which are a prerequisite of currency reform,” Biti said on Twitter.
Biti said such a move, which was hinted by Finance Minister Mthuli Ncube in January, was “pure, undiluted insanity.”
Zimbabwe has not had its own currency since it ditched the inflation-ravaged Zimbabwe dollar in 2009 in favour of a multiple currencies, mainly the United States dollar and the South African rand.
The country, beginning in 2016, has also been using bond notes, a surrogate currency which only works domestically. The Reserve Bank said the bond notes were backed by equivalent US dollars under an arrangement with the Afreximbank and were designed to stop “externalisation” of foreign currency.
The introduction of the bond notes saw the disappearance of US dollars from the banking system. Demand for the US dollar, for imports and by Zimbabweans travelling abroad, have fuelled a thriving black market while undermining the value of the bond note which now trades at 1: 3.50 with the US dollar.
“An unbanked currency is just the bond note by another name,” Biti said. “There’s no country in the world that has involuntarily dollarised that has ever succeeded in de-dollarising. Zimbabwe will not be the first. Whilst a currency is about fundamentals, ultimately the most important fundamental is confidence. There is absolutely no trust in this regime.”
Speaking in January, Ncube said Zimbabwe would introduce a new currency “within the next 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 currently has less than two weeks import cover, according to central bank data, and 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 Zimbabwe dollar, which became worthless as hyperinflation spiralled to reach 500 billion percent in 2008, the highest rate in the world for a country not at war, wiping out pensions and savings.
President Emmerson Mnangagwa is under pressure to revive the economy but, in something of a vicious circle, the dollar shortages are undermining efforts to win back foreign investors who will not be able to repatriate their profits.
With less than $400 million in actual cash in Zimbabwe according to central bank figures, there are fuel shortages and companies are struggling to import raw materials and equipment, forcing them to buy greenback notes on the black market at a premium.