Home Breaking News Zimbabwe Bans Use of US Dollar, Other Foreign Currencies in Shock Move

Zimbabwe Bans Use of US Dollar, Other Foreign Currencies in Shock Move

by Richard A Reagan

Zimbabwe has become synonymous in recent years with inflation. Its hyperinflationary crisis in 2009 was so bad that the Zimbabwean dollar was eventually abandoned when it reached an exchange rate of 35 quadrillion to one against the US dollar. Since that time Zimbabweans began to use foreign currencies in everyday transactions: South African rand, Zambian kwacha, and US dollars. That allowed for some modicum of normalcy. But the Zimbabwean government can’t stand not to be able to control monetary policy, so it has decided to ban those foreign currencies and reintroduce the Zimbabwean dollar.

As usual, the government has blamed the use of foreign currencies for the inflation within the country. The inflation rate of the Zimbabwean dollar is estimated at about 100% per year. That’s the result of a central bank that failed to learn its lesson from 2009 and that continue to believe that prosperity can come from a printing press.

With foreign currencies banned from use, you can guarantee that prices will spike as soon as retailers are forced to price goods in the ever weakening Zimbabwean dollar. Shortages of staple goods will likely result, particularly when the government decides to re-institute price controls, which in all likelihood it will. While electronic payments such as credit cards, mobile wallets, and cryptocurrencies had become popular methods of payment in Zimbabwe too, their use may similarly be relegated to the black market now that the Zimbabwean government is determined to retake control of monetary policy.

It’s a shame that the government failed to learn its lesson from the last crisis. The people certainly learned their lesson, which is why despite the reintroduction of the Zimbabwean dollar a few years ago they failed to adopt it, fully expected the government to continuing with massive inflation. It appears that they were right, and now that the government is shutting off all alternative means of payment, it may only be a matter of time before we see a repeat of 2009 and even worse pain for the Zimbabwean economy.

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