Harare, Zimbabwe | AFP | Zimbabwe announced on Monday that it would abandon the use of foreign currencies which replaced the local dollar that was swiped out by hyperinflation ten years ago.

The crisis-hit country is facing another bout of sharply rising prices, with official inflation now at nearly 100 per cent — the highest since the hyperinflation era.

Zimbabwe’s central bank said in a statement that official legal tender would be only the two local currencies — bond notes and “RTGS” — that were introduced as US dollar banknotes dried up.

The US dollar, South African rand and other foreign currencies “shall no longer be legal tender alongside the Zimbabwe dollar in any transactions in Zimbabwe,” the bank said.

“Bond notes and RTGS dollars are at par with the Zimbabwe dollar.”

Bond notes were introduced in 2014, while electronic RTGS (Real Time Gross Settlement) dollars came earlier this year.

President Emmerson Mnangagwa has promised to introduce a proper national currency soon.

Bond notes and RTGS dollars have in theory been worth the same as US dollars, but have fallen sharply in value.

Zimbabwe’s economy has been in ruins since hyperinflation peaked at 500 billion percent in 2009 under president Robert Mugabe.

Mnangagwa’s efforts to attract investment and create jobs have struggled since he came to power in 2017. </s> HARARE - Zimbabwe has declared its interim currency, the RTGS dollar, the country’s sole legal tender with effect from Monday, according to a government notice published on Monday.

“The British pound, United States dollar, South African rand Botswana pula and any other foreign currency whatsoever shall no longer be legal tender alongside the Zimbabwe dollar in any transactions in Zimbabwe,” the notice said.

The RTGS (Real Time Gross Settlement) dollar was introduced by the government on 22 February as the first step towards a new currency by year-end.

However, by last week it had plunged 60% against the US dollar and some Zimbabweans complain that many goods and services are still priced in foreign currencies, mainly the dollar and the rand.

Zimbabwe adopted the US dollar as its official currency in 2009, when most Zimbabweans had already ditched the hyperinflation-wrecked Zimbabwe Dollar.

Analysts fear the same situation repeating itself with the interim currency. In May year-on-year inflation soared to 75.86% and fuel prices have been climbing steadily, up more than 150% since the beginning of the year. </s> GOVERNMENT has outlawed the use of multiple currencies through new regulations that compel all forms of transacting to be done in local currency, now formally known as Zimbabwe dollar.

Through Statutory Instrument (SI) 142 of 2019, known as Reserve Bank of Zimbabwe (Legal Tender) Regulations, the Government abolished the use of British pound, United States dollar, South African rand, Botswana pula and any other foreign currencies, as legal tender.

Prior to the latest development, Zimbabwe used a basket of currencies collectively referred to as the multicurrency system, which was adopted in 2009 when the country scrapped its domestic currency.

Until today (Monday) payments in Zimbabwe could be made in any of the approved currencies that included the US dollar, British pound, South African rand, Botswana pula and RTGS dollar.

“Accordingly, the Zimbabwe dollar, with effect from 24th June, 2019, but subject to subsection 3, be the sole legal tender in Zimbabwe in all transactions,” Statutory Instrument 142 says.

The new Zimbabwe dollar will have same boundaries, extent in space, time, or meaning as the RTGS dollars, which entails all bond notes and approved forms of electronic money in Zimbabwe.

“For the avoidance of doubt, it is declared that references to the Zimbabwe dollar are conterminous with references to the following;

“The bond notes and coins referred to in section 44B, the electronic currency prescribed for purposes of section 44C of the Act, that is to say the RTGS dollar.

“The above mentioned bond notes and RTGS dollars are at par with the Zimbabwe dollar, that is to say each bond note unit and each RTGS dollar is equivalent to a Zimbabwe dollar and each 100th part of a RTGS dollar is equivalent to a Zimbabwean cent.” </s> HARARE, Zimbabwe — Zimbabwe President Emmerson Mnangagwa on Tuesday praised the re-introduction of the Zimbabwe dollar as the sole legal tender in the troubled country as a "return to normalcy."

Zimbabwe had for 10 years used the U.S. dollar and other foreign currencies after the Zimbabwean currency was dogged by hyperinflation.

Mnangagwa said it is the right time to scrap the use of foreign currencies, saying Zimbabwe's economy is "now functional" enough to adopt the usage of a single, local currency.

"We were living in an abnormal situation. We should actually be congratulated for taking this step," he told reporters at a press conference on the sidelines of a wildlife summit in the resort town of Victoria Falls.

"What we have done is we have gone back to normalcy," he said. "Normalcy is that the country must have its own currency."

Mnangagwa said the possession of foreign currency is not outlawed, but people will not be able to use it to buy items locally.

Finance Minister Mthuli Ncube on Monday announced the Zimbabwe dollar as the sole legal tender. Before Ncube's notice, Zimbabweans were using a multi-currency system dominated by the U.S. dollar after abandoning its own currency in 2009.

Zimbabwe later introduced a local currency called the bond note in 2016 to trade alongside the dollar, the British pound, the South African rand and other currencies. This bond note has now become the Zimbabwe dollar.

Most Zimbabwean businesses and residents do not yet fully grasp the change, as they had been mainly using U.S. dollars to avoid the rapidly devaluing local bond note.

Most traders pegged their prices on the dollar, resulting in prices in local currency changing, as much as several times a day in response to rising black market dollar rates.

With banks experiencing widespread shortages of cash, businesses have been forced to resort to the illegal street market to get foreign currency in order to restock. Zimbabwe's industry has been in the doldrums for more than a decade and the country imports most basic items.

Inflation is close to 98%, according to official figures, the highest since the 2009 collapse of the local currency. </s> In a bid to defend its fledgeling new currency against black market speculation, Zimbabwe‘s Finance Minister Mthuli Ncube has outlawed the use of the US dollar and a host of other foreign currencies in local transactions.

In 2009, Zimbabwe allowed the US dollar and other foreign currencies to be used as legal tender in the country after hyperinflation decimated the value of the Zimbabwean dollar.

Earlier this year, to pave the way towards ending so-called “dollarisation”, the country laid the foundations for a new Zimbabwean dollar by introducing an interim currency, the Real Time Gross Settlement dollar (RTGS) or “zollar”.

But since its launch in February, the RTGS has struggled amid black market speculation that has seen its value slide sharply against the US dollar.

Monday’s government decree values the RTGS at par with the Zimbabwe dollar and mandates it be used as the country’s sole legal tender for local transactions with immediate effect.

“The British pound, United States dollar, South African rand, Botswana pula and any other foreign currency whatsoever shall no longer be legal tender alongside the Zimbabwe dollar in any transactions in Zimbabwe,” read the decree.

But some believe the measure will not arrest the decline of the RTGS.

“I think its ridiculous measure,” said Eddie Cross, an economist and founding member of the Movement for Democratic Change, the main opposition party in Zimbabwe.

“The exchange rate will run and this is completely out of sync. For heaven’s sake, this is economic sabotage. I hope people will not go on the street tomorrow. This is just catastrophic,” Cross told Al Jazeera.

Independent economist Victor Bhoroma said businesses with debts denominated in foreign currencies could see the cost of servicing those obligations soar.

“It means that all debts contracted in USD are now payable in the local currency,” Bhoromoa told Al Jazeera. “All products and services that were being indexed in USD (ie, insurance and property) since it was legal tender will now be indexed in local Zimbabwean dollar.”

Bhoroma warned that this could trigger a spate of defaults and litigation against both businesses and the government. He added that businesses are unlikely to use the official exchange rate to price their products, “which negatively impact supply as producers adopt a wait and see attitude”.

Since taking over as finance minister, Ncube has hinted at currency reforms and the introduction of a full-fledged currency.

Monday’s decree is believed to be part of those reform efforts. But some economists are sceptical whether it can stop the country from gravitating back towards foreign currencies.

“Definitely, it is an attempt to stop redollarisation,” said Bhoromoa. “However dollarisation has many levels. Zimbabwe will still be in de-facto dollarisation as long as inflation levels for the Zimbabwean dollar are very high and in the absence of confidence in government institutions.” </s> Zimbabwe has banned the use of foreign currencies in a step to reintroduced its own dollar, causing widespread fears the country will slide again into hyperinflation.

President Emmerson Mnangagwa said today that the crisis-hit country was returning to normal as it moved to end its foreign currency system that has been in operation for a decade.

The country has a multi-currency system, including US dollars and South African rand since 2009, when the old Zimbabwe dollar was rendered worthless by hyperinflation as the economy collapsed.

But yesterday the central bank announced the British pound, United States dollar, South African rand Botswana pula as well as any other foreign currency, would no longer be legal tender.

In a step towards the introduction of a new currency, the bank said that US dollars and the rand would be replaced by two local parallel currencies - 'bond notes' and electronic RTGS dollars, which will be known as 'Zimbabwe dollars'.

Bond notes were introduced in 2014, while electronic RTGS (Real Time Gross Settlement) dollars came in earlier this year.

Both were in theory worth the same as US dollars, but trade far below the greenback in value.

In response to the announcement Zimbabwe's largest labour body today threatened mass protests over the government's decision.

Mnangagwa's government claimed the move was an important step towards removing economic imbalances.

But many Zimbabweans are distrustful after a long succession of failed economic interventions.

Zimbabwe Congress of Trade Unions (ZCTU) president Peter Mutasa told a press conference: 'If the government does not reverse this ruinous policy immediately and announce US dollar salary payments, we will immediately mobilise workers for mass action.

'The ZCTU has not moved from its position that the short-term solution is to dollarise and, as such, we are going into the tripartite negotiating forum (with government and business) to demand US dollar salary payments,' Mutasa added.

In January, the ZCTU led nationwide protests against a 150 per cent fuel price increase, triggering a violent crackdown by the army and police, which left at least 12 people dead, according to rights groups.

Most Zimbabwean businesses and residents do not yet fully grasp the change, as they had been mainly using U.S. dollars to avoid the rapidly devaluing local bond note.

Most traders pegged their prices on the dollar, resulting in prices in local currency changing, as much as several times a day in response to rising black market dollar rates.

With banks experiencing widespread shortages of cash, businesses have been forced to resort to the illegal street market to get foreign currency in order to restock. Zimbabwe's industry has been in the doldrums for more than a decade and the country imports most basic items.

Inflation is close to 98 er cent, according to official figures, the highest since the 2009 collapse of the local currency.

Zimbabweans took to social media to voice their concerns immediately after the announcement by Finance Minister Mthuli Ncube.

Some posted pictures of the old 1 trillion dollar notes and the piles of worthless cash the country was left with during the previous disastrous economic policies.

Mnangagwa replaced former leader Robert Mugabe after an army coup in November 2017, but a hoped-for economic turnaround has not materialised.

In February, Mnangagwa's government introduced the RTGS dollar as a transitional unit before relaunching the Zimbabwean dollar.

Monday's announcement created widespread confusion and criticism as the new Zimbabwe dollar has not yet been launched, and Zimbabweans have little faith in the economic record of the ZANU-PF government.

'What we have done is going back to normalcy,' Mnangagwa told reporters.

'Normalcy is that a country must have its own currency. We were living in an abnormal situation. We should actually be congratulating ourselves for taking this step.'

The country have recently endured another bout of sharply rising prices, with official inflation now at nearly 100 per cent - the highest since the hyperinflation era when it hit 500 billion per cent. </s> Zimbabwe has banned the use of foreign currencies in a step to reintroduced its own dollar, causing widespread fears the country will slide again into hyperinflation.

President Emmerson Mnangagwa said today that the crisis-hit country was returning to normal as it moved to end its foreign currency system that has been in operation for a decade.

The country has a multi-currency system, including US dollars and South African rand since 2009, when the old Zimbabwe dollar was rendered worthless by hyperinflation as the economy collapsed.

But yesterday the central bank announced the British pound, United States dollar, South African rand Botswana pula as well as any other foreign currency, would no longer be legal tender.

In a step towards the introduction of a new currency, the bank said that US dollars and the rand would be replaced by two local parallel currencies - 'bond notes' and electronic RTGS dollars, which will be known as 'Zimbabwe dollars'.

Bond notes were introduced in 2014, while electronic RTGS (Real Time Gross Settlement) dollars came in earlier this year.

Both were in theory worth the same as US dollars, but trade far below the greenback in value.

In response to the announcement Zimbabwe's largest labour body today threatened protests over the government's decision.

Mnangagwa's government claimed the move was an important step towards removing economic imbalances.

But many Zimbabweans are distrustful after a long succession of failed economic interventions.

Zimbabwe Congress of Trade Unions (ZCTU) president Peter Mutasa told a press conference: 'If the government does not reverse this ruinous policy immediately and announce US dollar salary payments, we will immediately mobilise workers for mass action.

'The ZCTU has not moved from its position that the short-term solution is to dollarise and, as such, we are going into the tripartite negotiating forum (with government and business) to demand US dollar salary payments,' Mutasa added.

In January, the ZCTU led nationwide protests against a 150 per cent fuel price increase, triggering a violent crackdown by the army and police, which left at least 12 people dead, according to rights groups.

Mnangagwa replaced longtime leader Robert Mugabe after an army coup in November 2017, but a hoped-for economic turnaround has not materialised.

In February, Mnangagwa's government introduced the RTGS dollar as a transitional unit before relaunching the Zimbabwean dollar.

Monday's announcement created widespread confusion and criticism as the new Zimbabwe dollar has not yet been launched, and Zimbabweans have little faith in the economic record of the ZANU-PF government.

'What we have done is going back to normalcy,' Mnangagwa told reporters.

'Normalcy is that a country must have its own currency. We were living in an abnormal situation. We should actually be congratulating ourselves for taking this step.'

The country have recently endured another bout of sharply rising prices, with official inflation now at nearly 100 per cent - the highest since the hyperinflation era when it hit 500 billion per cent.

Zimbabweans took to social media to voice their concerns immediately after the announcement.

Some posted pictures of the old 1 trillion dollar notes and the piles of worthless cash the country was left with during the previous disastrous economic policies. </s> Zimbabwe has had a bumpy time with its currency over the years. Now things suddenly appear simpler on paper, but in reality, they are much more complicated. On Monday, the country's central bank announced that, effective immediately, foreign currencies would no longer be legal tender. No more British pound, US dollar, South African rand or Botswanan pula. Not only that, but their use within the country's border will be a punishable offense.

According to the government in Harare, from now on only two things will be accepted in the southern Africa country of 16 million people: so-called bond notes and coins, and the Real Time Gross Settlement dollars (RTGS), which are only available electronically.

Though Zimbabwe's president, Emmerson Mnangagwa, has repeatedly said he wants to reintroduce a new national currency, the end to the country's multicurrency system came quite suddenly.

It was only in 2009 that Zimbabwe's local dollar was officially replaced by the US dollar to bring much needed stability to the economy. For most of the last decade the dollar was indeed a stabilizing hand, but recently the country was running out of the greenbacks as more was being spent on imports. Inflation was creeping up.

Good for business?

The latest announcement came as official inflation is hovering around 100%. Though well down from the unimaginable hyperinflation reached a decade ago that led to the downfall of the country's domestic currency, it's still high enough to cause pain to ordinary workers and businesses across the country.

Watch video 03:19 Share Zimbabwe land redistribution Send Facebook google+ Whatsapp Tumblr linkedin stumble Digg reddit Newsvine Permalink https://p.dw.com/p/3JvNy Zimbabwe farmers urge overhaul of landownership policies

Not surprisingly, many on the ground were caught off guard and are skeptical, not least because of the country's financial history. Christopher Mugaga, chief executive officer of the Zimbabwe National Chamber of Commerce, thinks these sudden changes are bad for businesses already suffering from uncertainty and will not solve the currency problem or put a stop to a parallel economy of different black market prices.

"The negative impact of such a move might include a shortage of commodities in the shops. Business people might not necessarily want to sell in RTGS openly," which would only lead to a growth in the black market. Inflation cannot be simply ignored or taken away, he added.

Where's the 'zollars'?

The clumsily named RTGS was originally meant as an interim stopgap alongside the American dollar. It was first implemented in 2016 near the end of Robert Mugabe's 37-year reign when the government started to pay with the electronic currency because of a lack of US dollars.

Demonstrators in Zimbabwe's capital, Harare, holding bags full of worthless cash in 2016

At the time, the central bank claimed that RTGSs were equal to the US dollar, but bank withdrawals were only given in bond notes, a type of paper currency, and not in actual dollars. The exchange rate on the street was not one-to-one, as many Zimbabweans looking for bucks on the black market found out.

With the economy lagging, the government finally devalued the currency by 60% in February. Since then it has fallen further. Blocking the use of foreign currency is a last-ditch effort to get a handle on the black market and stabilize the economy.

Yet this step just adds confusion to an already jumbled economy. Many people are paid in the Zimbabwean RTGS, but prices are still quoted in US dollars, especially for all imports. Some food, fuel and other imported goods are in short supply at the moment.

Taking back control

Jane Kawanza, who runs information and technology shops in Harare that are reliant on imports, expressed disappointment at the government's decision. "Our local currency is not stable — that means prices have to be marked up on a daily basis. And that's not good for business."

"If you have many branches, if you are a big business, it means you have to put high margins on your goods to avoid increasing prices on a daily basis. That is a huge disadvantage to the consumers because goods are going to be overpriced," she added.

For the moment, customers can pay with the official bond notes and coins or via mobile payment systems. These payments fall within the official government system and exchange rates. Nonetheless, many on the street are still buying and selling in US dollars or South African rands — and getting better deals — although it is no longer allowed. These two competing systems punish big chain stores that are afraid of going against government regulations and let smaller merchants deal under the radar. So far Harare has not gone after this parallel economy.

In any case, the government must prove that its new currency is trustworthy. This can only be done by getting inflation under control and restoring price stability. But going by the country's track record, it will be an uphill battle to convince the people of Zimbabwe to let go of the mighty US dollar and again reach for something more homemade. </s> Zimbabwe made its interim currency the country’s sole legal tender on Monday, ending a decade of dollarisation and taking a another step towards relaunching the Zimbabwean dollar.

The central bank also hiked its overnight lending rate to 50% from 15% as a part of a set of measures to protect the RTGS dollar introduced in February.

“The march towards full currency reform is part of our transitional stabilisation programme,” Finance Minister Mthuli Ncube said in a video posted on Twitter.

“This move is really beginning to restore full monetary policy.”

Zimbabwean President Emmerson Mnangagwa, who replaced longtime leader Robert Mugabe after an army coup in November 2017, is trying to repair an economy ruined by hyperinflation and a long succession of failed economic interventions.

But a hoped-for economic turnaround is yet to materialise, and many Zimbabweans are distrustful of Mnangagwa’s promises.

Mnangagwa’s government last month agreed a staff-monitored programme with the International Monetary Fund (IMF) whereby the fund will help Zimbabwe implement coherent economic policies.

Analysts are sceptical that the latest currency reforms will be a quick fix for the deep problems that have constrained economic growth in the southern African country.

“Zimbabwe will have to show results before people are convinced,” said Jee-A Van Der Linde, an economist at South Africa-based NKC African Economics.

Van Der Linde said banning the use of currencies such as the U.S. dollar and South African rand could create panic since Zimbabwe did not have large foreign-currency reserves to back the RTGS dollar.

There was nothing standing in the way of the Zimbabwean central bank printing money as it had done in the past, he added.

The central bank said in a statement on Monday that it had put in place letters of credit worth $330 million to secure imports for important goods such as fuel.

It would also try to boost liquidity on the interbank forex market by removing a cap on margins for banks and making sure that more than 50% of the foreign currency that Zimbabwean companies have to surrender ends up on the interbank market.

Zimbabwe abandoned its own dollar in 2009 after years of hyperinflation had destroyed trust in the local unit.

Mnangagwa said this month that Zimbabwe must reintroduce its own currency by the end of the year.

The IMF has said Zimbabwe should quickly allow the RTGS dollar to float freely, allow exporters to sell dollars at the interbank rate rather than surrender them to the central bank, and raise interest rates to curb inflation.

The RTGS dollar has been hitting new lows on the black market in recent days.

It was trading between 11 and 12 against the U.S. dollar on the unofficial market on Monday versus a level of around 6 on the official interbank market.

Many Zimbabweans complain that goods and services are still priced in other currencies.

While more than 80% of Zimbabweans earn RTGS dollars, goods ranging from bricks to groceries have their prices pegged in U.S. dollars.

Inflation raced to 97.85% in May, eroding salaries and savings and causing Zimbabweans to fear a return to the hyperinflation era a decade ago.
The Reserve Bank of Zimbabwe announces that, effective immediately, foreign currencies such as the United States dollar or South African rand will no longer be legal tender in the country, and that any use of foreign currency within Zimbabwe will be a punishable offense.