The Zimbabwean Government is getting ready to make changes to their currency again, according to President Emmerson Mnangagwa. He informed the Cabinet today, on February 6th, 2024.
The value of the Zimbabwean dollar (Zimdollar) has dropped by more than 90% compared to last year. As a result, the United States dollar (USD) is now used in more than 80% of transactions because people have lost faith in the ZWL.
Zimbabwe’s inflation rate continues to rise, and its currency is considered the weakest in the world. The inflation rate for December 2023 increased to 4.7% month-on-month and 26.5% year-on-year.
Mnangagwa mentioned that the currency reforms will involve implementing a “structured currency system.” The goal is to create stability in and promote the growth of both small-scale and large-scale economics.
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The Zimbabwean dollar and economy have experienced a tumultuous history marked by severe devaluation and collapse over the years. After gaining independence from British rule in 1980, Zimbabwe enjoyed a period of relative economic stability with a strong Zimbabwean dollar. However, in the late 1990s and early 2000s, the country faced a severe economic downturn. Mismanagement, corruption, and controversial land reforms led to hyperinflation, reaching astronomical levels of billions and trillions percent. The Zimbabwean dollar rapidly lost its value, causing economic hardships for the people.
To combat hyperinflation, the government introduced various measures, including the adoption of foreign currencies such as the United States dollar and South African rand – the multicurrency regime. In 2009, the Zimbabwean dollar was officially abandoned, and foreign currencies became the primary means of exchange. In 2016, the Reserve Bank of Zimbabwe introduced bond notes, a form of surrogate currency, as a response to a shortage of foreign currencies. However, this led to concerns about the potential for another round of hyperinflation.
In 2019, the government reintroduced the Zimbabwean dollar as the sole legal tender. However, this move was accompanied by rapid devaluation, with the value of the currency plummeting against major foreign currencies. The Zimbabwean dollar continues to face significant challenges, with high inflation rates and a lack of confidence in the currency. The collapse of the economy has resulted in widespread poverty, unemployment, and limited access to basic services. Several measures introduced by the government have so far failed to trigger the needed stability. Government critics including former Finance Minister Tendai Biti argue that the fiscal and financial policies introduced by the government are failing mainly because the masses do not have confidence in the ZANU PF government. As a result, the citizenry does not have confidence in the Zimbabwean dollar.