Zimbabwe made its interim currency, the RTGS dollar, the country’s sole legal tender on Monday.
The move banned the use of foreign currency for local transactions, ending the official use of US dollars after almost a decade.
The RTGS dollar was introduced in February as part of currency reform efforts aimed at stabilising the economy and containing spiralling inflation, government officials said.
Since taking office in 2018, President Emmerson Mnangagwa’s Zanu-PF government has grappled with fierce food, fuel and money shortages as the country struggles to shore up foreign currency reserves to pay for imports.
Since the local dollar crashed in 2009, Zimbabwe has accepted a host of foreign currencies for everyday transactions, but US dollar flight to neighbouring countries amid Zimbabwe’s economic malaise has led authorities to embark on currency reform.
The finance ministry introduced a new currency, the Real Time Gross Settlement dollar (RTGS) or “zollar” earlier this year.
Yet two months after its introduction the new currency seems to have made little immediate difference to the country’s sustained cash woes, and its value has plunged almost 50% on the black market.
On Monday the country’s finance ministry said it was the only currency acceptable 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,” the statement said.
Under the move the new Zimbabwe dollar will be combined with the bank notes, coins and electronic currencies of the RTGS dollar currently in circulation to form one single currency.
In a statement on Tuesday, President Mnangagwa said the new currency was essential to control hyperinflation which was “unfair and unsustainable.”
“It has always been clear that for the economy to truly take off, we need our own currency. While the multi-currency regime helped to stabilise the economy it did not give us control of monetary policy and left us at the mercy of the US dollar which has been a root cause of inflation.”
Currency reform is a “key component” of the country’s transitional stabilisation programme, and “an important step in restoring normalcy to our economy,” he added.
The government and Reserve Bank are increasing the flow of forex into the interbank market and providing small businesses and individuals access to forex through exchange bureaux, said Mnangagwa, who took power in an army coup in November 2017, replacing Robert Mugabe who ruled for 37 years.
Those holding foreign currency accounts, known as Nostros, will still have access to their accounts in the currency they held, he added.
It has always been clear that for our economy to truly take off, we need our own currency. My full statement is below: pic.twitter.com/rcjLzmpE9B— President of Zimbabwe (@edmnangagwa) June 25, 2019
In a video posted on Twitter, Zimbabwe’s finance minister Mthuli Ncube commented:
“This move is really beginning to restore full monetary policy.”