HARARE – Zimbabwe on Thursday re-introduced the use of foreign currency for domestic transactions in what was seen as a bid to tap into private forex savings as the country gears up for the battle against the novel coronavirus.
Central bank governor John Mangudya said the move is part of “measures to mitigate the devastating impact of Covid-19 on the Zimbabwean society and the economy,” but critics said he was re-dollarising “through the backdoor.”
The government outlawed the use of foreign currency as legal tender last June after having used a basket of currencies when hyperinflation forced the government to ditch the Zimbabwe dollar in 2009.
The United States dollar became the main currency for payment of goods and services, but a shortage of greenbacks forced the government to introduce a quasi-currency called the bond note which was supposed to be equal to the US dollar in 2016.
In February 2019, Zimbabwe launched currency reforms including reintroducing the local currency and banned the use of the U.S. dollar in June in a bid to solve a monetary crisis.
The use of the Zimbabwe dollar as the sole legal tender led to a spike of inflation which now stands at 540 percent.
The government said it was “making it easier for the transacting public to conduct business during this difficult period by making available an option to use free funds to pay for goods and services chargeable in local currency”.
But labour economist Godfrey Kanyenze said the move was inevitable and the government has used the coronavirus pandemic as an excuse to try to stabilise the economy.
“We held a tripartite negotiation forum meeting with the government some two weeks ago, and business and labour agreed the Zimbabwe dollar was doomed. The government tacitly agreed,” he told AFP.
While the RBZ statement suggests the legalisation of the use of foreign currency was temporary, Kanyenze said he believed the measure would stay in place long term.
Former finance minister Tendai Biti said the government of President Emmerson Mnangagwa was admitting failure.
“The regime has radically done a volte face and sneakily re-dollarised. We told them it wouldn’t work and won’t work. They owe Zimbabweans an apology and they should now bring a bill to Parliament formally repealing those sections of the Finance Act that incorporated statutory instrument 33 and 142 of 2019,” Biti wrote on Twitter.
“Public policy must be consistent, predictable and for the public good. It surely can’t be the business of government to disrupt people’s lives. The confusion around monetary policy and the mismanagement of forex in Zimbabwe reflects structural incompetence and indifference.
“Undoing this dog’s breakfast will be a nightmare. We make the point once more that this is the worst government in the history of governments.” – AFP
