Foreign currency ban triggers uncertainty in Zimbabwe

By Jeffrey Moyo

HARARE, Zimbabwe (AA) - The recent decision by the Zimbabwean government to ban local trading in foreign currencies including the US dollar has created uncertainty among traders and investors in the country.

The Reserve Bank of Zimbabwe announced this week it was reintroducing the Zimbabwean dollar, a currency it stopped using over a decade ago due to hyperinflation.

"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," according to a decree from the Zimbabwean government.

Mavis Chauke a 39-year old, single mother of four who runs a shop in downtown Harare, Capital city of Zimbabwe is among those who are uncertain if the new currency will work or not.

“I’m just waiting to see if the idea will work. I have traded my wares in US dollars because I order my goods for sale from neighboring countries like South Africa and so I have to change the money I get in order to then buy my wares for sale here,” Chauke told Anadolu Agency.

Besides selling various items in her small shop in Harare, Chauke said she also trades in foreign currency as money changer.

She said the business of trading foreign currency on the black market has now become more risky as security personnel hunt them down.

Zimbabwe’s many years of economic crisis create high unemployment forcing some people to join the illegal foreign currency business on the streets of Harare.

- 'Sink or swim for Zimbabwe'

Many informal businesspersons like Chauke face Zimbabwe’s hostile economy at a time the country’s inflation rate this year jumped to 97.85 % in May from 75.86 % in the previous month.

For Chauke, the ban of multi-currencies like US dollars in Zimbabwe, triggers memories of the 2008 hyperinflation period when the Zimbabwean dollar was rendered worthless before government dumped it in favor of multiple foreign currencies.

Economists have reacted differently to the resurrection of Zimbabwe’s currency. For some, it means the country has put the last nail on its coffin of economic demise, while for a few others it means well.

“This is a huge gamble and it is sink or swim for Zimbabwe. If the gamble doesn’t work and the Zimbabwe dollar suffers a similar fate to its predecessor the consequences will be unimaginable,” Alex Magaisa, a UK-based Zimbabwean constitutional law expert, said.

He said if the reintroduced Zimbabwean dollar fails to curb inflation then government would have run out of options. “This was one of the final cards. They have thrown it in. Let’s see how the market responds,” he said.

Kingston Gavi, an independent economist said: “The new Zimbabwean dollar would arrest the speculation that had sent illegal money changers thriving on the black market. Now people will change their foreign currency in banks, bringing normalcy.”

Other independent economists like Edie Cross, former opposition politician of the Movement for Democratic Change (MDC) views Zimbabwe’s new currency move as more disastrous.

"I think it’s a ridiculous measure; the exchange rate will run and this is completely out of sync. For heaven's sake, this is economic sabotage," Cross, who is also founding member of the MDC, the main opposition party in Zimbabwe said.

Independent economist Gerald Hungwe believes the scrapping of multi currencies will create more confusion in the financial sector.

“Businesses which had debts in forms of foreign currencies like US dollars could see the cost of servicing those debts rise. Ban of multi currencies means that all debts accrued in US dollars are now payable in the local currency," Hungwe told Anadolu Agency.

For informal businesspersons here like Chauke, it is also time for reality check.

“The real change is that the Zimbabwean Dollar has now been declared to be the sole legal tender, which means, we have returned to where we departed from over a decade ago and it means we have resurrected a crisis of hyperinflation again. I am afraid,” said Chauke.