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In Zimbabwe, where nine foreign currencies battle out

By Xinua | Published Mon, February 17th 2014 at 00:00, Updated February 17th 2014 at 15:12 GMT +3


HARARE, Zimbabwe - American greenback or Chinese Yuan?  Zimbabweans are now given more options as of which money they prefer to put in their pockets.

The southern African country, without its own currency at the moment, has allowed altogether nine of the world's major money to trade as legal tender since January.

Chinese yuan, along with Japanese yen, Indian rupee and the Australian dollar, were officially added in the basket of currencies accepted as legal tender in Zimbabwe in January.

Acting central bank governor Charity Dhliwayo, who made the announcement, said it was done considering trade and investment ties between Zimbabwe and China, India, Japan and Australia. Dhliwayo said individuals and businesses can now open bank accounts denominated in the four new currencies, in addition to Botswana pula, British pound, South African rand, and the U.S. dollar. 

For the dominating currency, market analysts put their bet on the U.S. dollar, which most Zimbabweans have been using since 2009, at least for the near future.

Chinese yuan is a likely challenger to the greenback as trade and economic interaction grow. Zimbabwe abandoned its currency in 2009 after hyperinflation rendered it worthless and has since adopted the multi-currency regime. But four years on, prices across the country are almost all denominated in the greenback with rand and pula being used as changes less than a dollar. The pound and euro, however, are rarely seen.

Dhliwayo confirmed that the government, led by veteran President Robert Mugabe, had made it clear that the widespread "speculated" re-introduction of the Zimbabwean dollar can be "put to rest." John Robertson, an independent economic analyst, said the four new currencies are likely to meet the same fate as the pound and euro.

He also refuted that the move would solve the severe liquidity crunch the country faces. "The additional currencies that can now be officially used in Zimbabwe will not make the slightest difference to anything," Robertson said. "We price our exports in U.S. dollar, we price our imports in either U.S. dollar or rand and the additional currencies on the list won't affect the quantities of money flowing either way," he said.

Although four currencies were added to the already circulating currencies, people reacted to the Chinese yuan more than other currencies probably because "made in China" products flourish in the Zimbabwean market.

Some banks  like BancABC and Stanbic have already launched the yuan services while others like Standard Chartered and the Barclays say they haven't officially received the directive from central bank.

Economist and University of Zimbabwe lecturer Edgar Muhoyi said with the recent move, China will transact more easily with Zimbabwe than before. Trade between China and Zimbabwe has grown over 1 billion U.S. dollars annually for the past two years and China has been Zimbabwe's biggest source of foreign investment since 2009.

Chinese investments cover a wide range of sectors from mining, manufacturing, to agriculture and social services. "Now with 'Look East' policy, we are much involved in transactions with China as compared to the rest of the world. The yuan may even beat the U.S. dollar in the market," said Muhoyi.  He said the preferred currency will be the one that is more stable and will also depend on the transactions being made.

A young businessman, who sells electronic gadgets and identified himself as Popula, welcomed the central bank's move as he buys most of his goods from China.

"I think for the mean time the addition of the Chinese yuan in the basket will make transactions easier than before since we no longer need to convert the money first," he said.

 But some forex dealers and retailers are caught off guard by the central bank's move, raising the concern that with more currencies, transactions will become more tedious and time consuming. There are no signs yet that more Chinese notes will flood into the market. In shops, people still get their changes in rand, credit notes, phone top-up cards, candies, and popsicles.

“We are already having trouble exchanging the U.S. dollar and the rand in shops, now we have Chinese and Indian money. It means we have to make calculations every time we serve a customer," said Gladys Ruziviso, a sales person in a chain shop. "Customers don't like to make conversions and will not be happy to receive change in other currencies other than the rand," she said.

 Russel Mutyambizi, a foreign currency dealer, said he fears that people might be fooled by the fake notes as most Zimbabweans, including forex dealers, are not familiar with the new currencies.  "How many Zimbabweans can differentiate a fake yuan from the original one," said Mutyambizi.


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