Zimbabwe brings back the US dollar to deal with Covid-19

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HARARE – Zimbabwe has temporarily reintroduced the use of the US dollar as a medium of exchange as part of its fight against Covid-19, the Reserve Bank said.

The country outlawed the use of foreign currency in June last year as it sought to reintroduce the Zimbabwe dollar demonetised in 2009 after reaching world record hyperinflation.

The US dollar makes a return when annual inflation stands at 1,106% and US$1 is equivalent to ZW$45. The move, according to Governor John Mangudya, is to promote social distancing.

“Government, through the Reserve Bank of Zimbabwe, would like to advise the public that it is making it easier for the transacting public to conduct business during this difficult period by making available an option to pay using free funds for goods and services chargeable in local currency.

“The dispensation to use free funds will also promote social distancing as banks will be able to provide digital financial services to their customers that include producers of gold, tobacco and recipients of diaspora remittances,” he said in a statement.

Social distancing, staying at home and sanitising hands are part of the many advised World Health Organisation (WHO) measures in the fight against Covid-19.

Some banks have since closed their branches and reduced working hours. They also reduced the number of people to an average of 10 clients inside the banking hall.

But economist Steven Dlamini from the University of Science and Technology (NUST) said reverting to the use of the Zimbabwean dollar as the only acceptable currency in about two months’ time when the Covid-19 programme is expected to be done with will leave the local currency worse off.

“People might have forex in their homes but the rate (US$1=ZW$25) will keep the black market alive and they will still crowd in illegal money changing places breeding Covid-19. There are many businesses that have been doing it anyway (rating goods using the illegal rate) and it will be hard for them to go back to taking the Zimbabwe dollar alone. The local dollar would have also taken a big knock then,” he said.