Why Zimbabwe Is Fed Up With Using the U.S. Dollar

A decade after Zimbabwe scrapped its own currency to tackle hyperinflation and began using instead mainly the U.S. dollar, the economy is back in free fall. Fuel and banknotes are hard to come by, less than 10 percent of the workforce is formally employed and consumers are being charged different prices depending on how they pay for purchases. President Emmerson Mnangagwa’s administration has now introduced a new financial instrument in a bid to address cash scarcity and restore normality to the currency markets.

Zimbabwe became the world’s only multi-currency economy in 2009, when it adopted the dollar, euro, South African rand and other currencies as legal tender. The new currency regime initially stabilized prices, but it also increased imports and gave rise to a chronic shortage of banknotes. To fund government spending and help ease the liquidity crisis, the central bank began printing bond notes in 2016 that were pegged, at least theoretically, to the dollar. Meanwhile, most commercial transactions are conducted electronically. The parallel systems have resulted in multiple exchange rates, while the shortage of cash has persisted.