New currencies mean choice but no real difference, say experts

The recent announcement by the acting governor of the Reserve Bank of Zimbabwe, Charity Dhliwayo, that the Chinese yuan, Australian dollar, Indian rupee and Japanese yen would be accepted as legal tender, set some sections of the nation panicking.

There were fears that the adoption of the Chinese currency would be tantamount to bringing back the Zimbabwean dollar to the economy.

Political commentator Rejoice Ngwenya said adopting the four other currencies would not make any difference, since people would have choice about which currency to use at individual level. “Zimbabwe was already operating under multiple currency and choices about which one to use are determined by the market and individuals,” Ngwenya said.

He added that, everything being normal, the strength of the market economy would eventually force people to migrate to the currency they used most – the US dollar.

Economist Eric Bloch said the introduction of the new currencies would not mean much improvement for the liquidity crunch.

Bloch said the Chinese yuan would be massively deposited in the banking system and gradually released into circulation. “People should not panic because the yuan will be convertible to the US dollar or other preferred currencies,” Bloch said.

He said people should feel at home with the new currencies since they were not the discarded Zimbabwean dollar. The United States dollar and the South Africa rand would remain the main legal tender.

Though the Reserve Bank said the new development was as a result of improved trade between Zimbabwe and the four countries, observers said it was actually down to the severe and persistent liquidity crunch the country was experiencing.

Since the end of last year, government and some companies have struggled to pay workers’ salaries due to cash shortages.

Depositors were not spared the inconvenience, as they were either restricted by cash withdrawal limits or banks had nothing for clients to withdraw. Zimbabwe’s situation was worsened by its failure to get loans from international financial institutions, as it was blacklisted as a bad debtor.