Why Zimbabwe needs a new currency

Zimbabwe has been inching towards a new currency for years.

Over the last nine months, the economy has fallen into its worst crisis in 10 years.

In Summary
• In US dollar terms, some basic goods are now cheaper than they used to be.

• In February the dollar was officially pegged at 2.5 RTGS but $1 now buys 6.2 RTGS, and 11 RTGS on the black market.

Zimbabwe has been inching towards a new currency for years.

What President Emmerson Mnangagwa has done is to clarify the timeline, and provide a deadline to the end of the current multi-currency system – March 2020.

Over the last nine months, the economy has fallen into its worst crisis in 10 years. Inflation is on the rise, sparking fears that locals won’t accept a new currency that is likely to lose value as quickly as the RTGS dollar has over the last four months.

This quasi-currency was introduced in February because the country didn’t have enough US dollars, even though that was Zimbabwe’s official currency, along with the South African rand, the Chinese yuan and others.

In US dollar terms, some basic goods are now cheaper than they used to be. Bread that used to cost $1 now costs 3.5 RTGS (about 56 US cents).

The problem is that 85% of Zimbabweans don’t earn in US dollars – and their RTGS salaries have not kept up with the devaluing currency.

In February the dollar was officially pegged at 2.5 RTGS but $1 now buys 6.2 RTGS, and 11 RTGS on the black market.

In some shops, prices are published in US dollars and converted into RTGS at the daily black market rate.

AFP

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