Zimbabwe launches new currency amid fears of return to hyperinflation

29 Nov 16

Zimbabwe has launched its controversial new currency, pegged to the US dollar, in the hope of easing a crippling cash crisis.

Zimbabwe has launched its controversial new currency, pegged to the US dollar, in the hope of easing a crippling cash crisis.

The introduction of the “bond notes”, issued today by the country’s central bank, is unwelcome to many, who see it as opening the door to a return to unrestrained money printing, hyperinflation and a rampant black market.

Within a few hours on Monday, Twitter was awash with claims that the notes had already devalued against the dollar and were not being accepted by major retailers or fuel stations, although others disputed these reports.

The bond notes are one of the factors that have fuelled widespread protests in the country in the past year – which have marked some of the biggest anti-Mugabe demonstrations in a decade.

Strikes, demonstrations and mass national “shut ins”, where citizens stayed at home, have been organised to protest a chronic cash shortage, long delays to public sector pay, and corruption. However, recently, these protests have led to arrests.

After years of economic decline, Zimbabwe’s coffers were stretched further by this year’s El Niño-induced drought.

The country recently cleared its arrears with the International Monetary Fund, but still remains unable to access any finance.

Many are worried the bond notes will usher in further economic turmoil, triggered by a return to hyperinflation, which previously pushed the economy to the brink of collapse.

Only the introduction of the US dollar in 2009 stabilised the economy. The Reserve Bank of Zimbabwe said no new accounts will be opened and instead bond notes will be deposited in accounts currently holding US dollars, leaving some concerned for their savings.

The RBZ argues that bond notes will ease cash shortages and deter “foreign exchange malpractices” such as US dollar hoarding and capital flight, facilitated by a multi-currency system.

However, the Movement for Democratic Change, Zimbabwe’s main opposition party, predicts that depositors will withdraw their US dollar cash and keep it elsewhere, encourage the black market, and restrict imports as a result of a rationing of foreign exchange.

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