Zimbabwe, an ailing economy which fuels a severe cash shortage, is introducing its own version of US dollar to deal with its worsening cash crunch.
Governor of the Reserve Bank of Zimbabwe, John Mangudya, in a statement on Thursday said the bank will introduce “bond notes” of $2, $5, $10, and $20, which will hold the same value as their US dollar counterparts.
The bond notes, to be introduced over the next two months, will be backed by $200 million provided by the Africa Export Import Bank. Mangudya also said the bank will convert 40% of dollar receipts from the country’s exports into rand and limit daily withdrawals to $1,000.
Zimbabwe introduced the US dollar after ditching its own currency in 2009 following sustained hyperinflation.
Ever since declaring its own currency defunct in 2009, Zimbabwe has relied on a basket of currencies that includes the US dollar, the South African rand, the British sterling, and most recently the Chinese yuan.
A strengthening dollar has made Zimbabwe’s trade deficit worse—Zimbabwe imports everything from cooking oil to bath soap—imports for the first quarter of the year stood at $490 million, compared to $167 million in exports.
As Zimbabwe faces deepening economic woes after drought weakened vital agricultural production and disrupted hydro power generation, cash-strapped residents are lining up outside banks in the capital to get dollars to pay for everything from groceries to school fees.
In 2014, Zimbabwe introduced bond coins, of between 1 cent and 50 cents, pegged to the US dollar, to deal with the country’s lack of small change.
But few Zimbabweans took to them, fearing that the government was bringing back its now worthless currency that caused many to lose their life’s savings.
Critics say the new bond notes aren’t likely to be well received, projecting that there’s not going to be any difference. Some say Mangudya once again is trying to introduce the Zimbabwe currency through the back door.