Since abandoning the Zimbabwean dollar in 2009, Zimbabwe’s central bank has allowed the use of the U.S. dollar, the South African rand, the British pound, and the Botswanan pula. Recently, the central bank announced that four additional currencies will become legal tender in Zimbabwe: Australian dollars, Chinese yuan, Indian rupees, and Japanese yen. The hope is that the move to more currencies will bring in more cash and quell the ongoing liquidity crisis, which has forced some banks to stop lending altogether.
For the time being, customers can open bank accounts in the four new currencies; however, the hard cash is not yet being used in normal, everyday transactions. A growing concern is that having eight currencies will slow down the time it takes to complete a transaction and cause confusion for merchants, who will have to juggle multiple exchange rates. These problems will likely decline in severity as customers and merchants adapt to the new system, but could hinder the efficiency of transactions in the early going. Another concern is that having unfamiliar currencies will make counterfeiting easier and more prevalent.
A key reason for this multi-currency regime is to prevent hyperinflation, which made the Zimbabwean dollar worthless before it was abandoned as Zimbabwe’s currency. Also, the existence of multiple currencies should limit currency fluctuations that once ran rampant with the unstable Zimbabwean currency. Multiple currencies will also provide something that has long been scarce – small change. Zimbabwe’s liquidity crisis left the country void of sufficient amounts of small change, which led to store owners giving customers things like candy and airtime for mobile phones instead of coins.
Hopefully the introduction of more currencies will give the Zimbabwean economy more stability and allow for more fluid lending practices by the banks. It is a system that will undoubtedly take some getting used to but in the end could provide the balance needed for Zimbabwe to continue to develop economically.