Zimbabwe to Buy Small Denominations to Fix Currency Crisis

The Finance Minister of Zimbabwe has announced that his country would import small change to stave off worsening currency problems. The day to day lives of the Zimbabweans have become difficult ever since the country experienced severe shortage of small change, resulting in transactional impasse.

The Finance Minister Tendai Biti admitted “Under the current multi currency regime, the inadequacy of smaller denominations has posed a number of challenges in transactions.” Nonetheless, the economic commentator Bekithemba Mhlanga told VOA Studio 7 reporter Gibbs Dube that the country needed to adopt the rand as its principal currency to hold down large importation costs of notes and coins. “Zimbabwe will fail to import all these required small denominations if it does not adopt the rand,” Mhlanga suggested.

The Zimbabwean government dumped the local currency last year in favour of the US Dollar, the South African Rand and the Botswana Pula as the political crisis and economic meltdown triggered record-breaking hyperinflation. Even though the currency situation improved after it adopted multi currency system the cash flow got impeded in view of US embargo pressure and poor returns from investments.

The acute shortage of foreign currency in the country has even deterred many Zimbabweans from depositing their money in banks. Some reports claim that people are literally washing the dirty US dollar bills to extent their lives in circulation.

The US Federal Reserve destroys about 7,000 tons of worn-out notes every year, and it is estimated, the average $1 bill circulates in the US for about 20 months. Though larger denominations are less dirtied since they are either from banks or international trade, smaller denominational US currencies outlive the estimated circulatory cycle in Zimbabwe.

Interestingly, the retailers have resorted to requesting shoppers to take other goods in exchange of change, and in some cases ‘credit notes’ replaced the balance of small change. Such credit notes even entitled shoppers to redeem them at a later stage for more goods from the issued shops.

By Jose Roy