By Mercy Imali
On Monday 24th June, 2019 Zimbabwe made its interim currency the country’s sole legal tender. This is a step towards relaunching the Zimbabwean dollar and ends a decade of dollarization.
In an effort to protect the RTGS dollar introduced in February, the central bank hiked its overnight lending rate upto 50% from 15%.
Finance Minister Mthuli Ncube said, “The march towards full currency reform is part of our transitional stabilisation programme. This move is really beginning to restore full monetary policy.”
Zimbabwe abandoned its own dollar in 2009 after years of hyperinflation had destroyed trust in the local unit.
Zimbabwean President Emmerson Mnangagwa, said this month that the country must reintroduce its own currency by the end of the year
Mnangagwa is working hard to repair an economy ruined by hyperinflation and a long succession of failed economic interventions.
The central bank said in a statement on Monday that it had put in place letters of credit worth $330 million to secure imports for important goods such as fuel.
It would also try to boost liquidity on the interbank forex market by removing a cap on margins for banks and making sure that more than 50% of the foreign currency that Zimbabwean companies have to surrender ends up on the interbank market.
Inflation raced to 97.85% in May, eroding salaries and savings and causing Zimbabweans to fear a return to the hyperinflation era a decade ago.
The IMF has said Zimbabwe should quickly allow the RTGS dollar to float freely, allow exporters to sell dollars at the interbank rate rather than surrender them to the central bank, and raise interest rates to curb inflation.
The RTGS dollar has hit new lows on the black market in recent days. It was trading between 11 and 12 against the U.S. dollar on the unofficial market on Monday versus a level of around 6 on the official interbank market.
Many Zimbabweans complain that goods and services are still priced in other currencies.