Zimbabwe reintroduces US dollar amid coronavirus panic

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(iStock)
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Zimbabwe's government has reintroduced the use of foreign currency as a stabilising measure as the coronavirus pandemic strikes.

Zimbabwe's central bank has reintroduced the use of foreign currency for the purchase of local goods and services exactly eight months after it instituted the exclusive use of the Zimbabwe dollar for local transactions.

In a statement released on Thursday evening, central bank governor Dr John Mangudya said the move was in response "to the financial vulnerabilities caused by the Covid-19 pandemic".

"Government, through the Reserve Bank of Zimbabwe, would like to advise the public that it is making it easier for the transacting public to conduct business during this difficult period by making available an option to use free funds to pay for goods and services chargeable in local currency," read the central bank's statement.

It added that the exchange rate for those local transactions would be fixed at Z$25 for every US$1.

According to the statement, the intervention takes into account the country’s limited access to foreign finance, which is adversely affecting the country’s balance of payments position.

"Related to the above measures, government, through the Bank, has suspended the managed floating exchange rate system to provide for greater certainty in the pricing of goods and services in the economy," it reads.

Further, the RBZ reduced the Statutory Reserve Ratio from 5% to 4.5% in order to free some funds to the banks to enhance their lending activities.

It also reduced the official lending rate from 35% to 25%.

The measures will be reviewed when markets stabilise from the effects of the coronavirus, the Reserve Bank said.

 

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