Zimbabwe abandoned the Zimbabwe dollar in 2009 after the currency had been rendered valueless by hyperinflation. The crisis peaked in 2007 when the country experienced the second-highest recorded inflation rate in world history.
Since then, the US dollar has been the main currency for transactions, as well as the South African Rand.
Speaking in Bulawayo, President Mnangagwa said the grinding cash crisis could only be resolved by introducing a domestic currency.
“Next issue is the question of cash availability in our banks. Our Zimbabwe dollar collapsed in 2008 and 2009. We then adopted a basket of currencies − the South African rand, the United States dollar, the British pound, the Euro and so on,” Mnangagwa said.
And in recent years a cash shortage has been slowly strangling the economy, which is half the size it was at the turn of the millennium.
“Initially, the US dollar and the rand accounted for 40% each and the other 20% was the balance of other currencies. As time went on, the US dollar became dominant. The US dollar today takes about 90% of our transactional activity in the economy. We have no control over the US dollar, it is time that we must adopt our way of restoring the dignity of our country by creating our own currency,” he added.
In the longer term, Zimbabwe needs to have its own currency.
Using the US dollar was necessary after the old Zim dollar became worth less than the paper it was printed on and met its death.
But there is so much more to creating a viable currency than switching on a printing press. Confidence is key.
Last year, the Reserve Bank introduced “bond notes” which were meant to alleviate the chronic shortage of US dollars in the system. Bond notes was introduced in November 2016 to ease an acute cash shortage and are backed by a $200 million African Export-Import Bank facility.
The surrogate currency has, however, failed to address the banknote shortage.
So far the bond note has been received with low confidence and has seen the rate verse the USD shoot to 60%-65%.