The government approved the use of multiple foreign currencies in
January to curb runaway inflation that had decimated the value of the
Zimbabwe dollar to junk status.
Dollarisation has reversed hyperinflation, with the consumer price
index or inflation falling by 3 percent for two months in a row,
according to the Central Statistical Office.
Mangoma made the declaration hardly a month after Finance minister
Tendai Biti projected the imminent death of the Zimbabwe dollar.
"The death of the Zimbabwe dollar is a reality we have to live with.
Since October 2008 our national currency has become moribund," Biti
said while presenting a revised 2009 budget in Parliament.
Professor Steve Hanke, a senior fellow of the Cato Institute in
Washington, said in a commentary: "Ashes are all that is left of the
Zimbabwe dollar – a remnant of paper money."
Until last weekend, Zimbabwe’s paper money remnant circulated alongside
foreign currencies, but its real value was tiny, its use had become
limited, and its value against the US dollar had been eroded
dramatically.
Finally, the government has bowed to economic reality and scrapped the
Zimbabwe dollar altogether. Economists say legalising the process of
"dollarisation" – the replacement of local currency with the US dollar
– was the master stroke by the new administration.
The switchover to foreign currency helped the country considerably, allowing stores to reopen and restock their shelves.
However, the country will need a lot of support to recover from the
crisis brought on by the decades of misgovernance by a corrupt elite.
The government is seeking US$8 billion but a skeptical international
community that has the capacity to bankroll Zimbabwe’s reconstruction
is insisting it will not provide support until there is evidence that
Mugabe and Zanu (PF) are committed to genuinely sharing power with new
Prime Minister Morgan Tsvangirai, leader of the MDC.
At Zimbabwe’s peak hyperinflation in December, it failed to break
Hungary’s world record for hyperinflation, which it set at 195 million
percent a day in 1946. However Zimbabwe easily beat Yugoslavia’s 1994
hyperinflation mark of 313 million percent a month to secure second
place in the record books.
The power-sharing government led by Prime Minister Tsvangirai has
prioritised rebuilding the devastated Zimbabwe economy since taking
office in February.
Mangoma said the government had decided the Zimbabwe dollar should only
be brought back only when industrial output returns to about 60 percent
of capacity from the current average of 20 percent.
Critics accuse Reserve Bank of Zimbabwe governor Gideon Gono of
vandalising the local currency through profligate printing of money, a
charge the central bank chief staunchly denies insisting he was working
under instructions. Gono told parliamentarians two weeks ago: "you
cannot shoot the messenger."