Zimbabwe to adopt Chinese yuan as legal currency

Zimbabwe to adopt Chinese yuan as legal currency

The Guardian (UK)

Zimbabwe has announced that it will make the Chinese yuan legal tender after Beijing confirmed it would cancel $40m in debts.

“They [China] said they are cancelling our debts that are maturing this year and we are in the process of finalising the debt instruments and calculating the debts,” minister Patrick Chinamasa said in a statement.

Chinamasa also announced that Zimbabwe will officially make the Chinese yuan legal tender as it seeks to increase trade with Beijing.

Zimbabwe abandoned its own dollar in 2009 after hyperinflation, which had peaked at around 500bn%, rendered it unusable.

It then started using a slew of foreign currencies, including the US dollar and the South African rand.

The yuan was later added to the basket of the foreign currencies, but its use had not been approved yet for public transactions in the market dominated by the greenback.

Use of the yuan “will be a function of trade between China and Zimbabwe and acceptability with customers in Zimbabwe,” the minister said.

Zimbabwe’s central bank chief John Mangudya was in negotiations with the People’s Bank of China “to see whether we can enhance its usage here,” said Chinamasa.

China is Zimbabwe’s biggest trading partner following Zimbabwe’s isolation by its former western trading partners over Harare’s human rights record.

In reaction veteran president Robert Mugabe adopted a “look East policy”, forging new alliances with eastern Asian countries and buttressing existing ones.

In early December, Chinese president Xi Jinping stopped over in Zimbabwe in a rare trip by a world leader to the country, and presided over the signing of various agreements, mainly to upgrade and rebuild Zimbabwe’s infrastructure such as power stations.
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December 22, 2015
Zimbabwean president slams banks for charging high rates

Xinhua

HARARE- Zimbabwean President Robert Mugabe on Tuesday slammed local banks for charging high interest rates, which, he said, stifled economic recovery.

The president said what the banks were doing was akin to extortion and imposition of sanctions against depositors.

The banks have been charging interest rates as high as 35 percent per annum while paying comparatively very little interest on deposits, citing high cost of money from external markets for the exorbitant rates.

The banks recently reduced the interest rates by more than 10 percent after reaching an agreement with the central bank.

“The banks are still in the habit of charging interest rates well beyond the principle sum borrowed,” Mugabe said.

“We have said this must stop; it is extortion, extortion by our banks. If they can not do banking in the proper way, please they should stop it,” he said.

The president, who was speaking at the burial of businessman and ruling Zanu-PF central committee member Aguy Georgias at the national shrine, said banks were worsening the already difficult economic situation by charging exorbitant rates.

“This economy faces many challenges brought mainly by sanctions but there is a way in which the banking sector has not made matters any easier. Banks seem to pass their own sanctions package against us including those who deposit with them,” he said.

The president said the high interest rates undermined economic recovery efforts through “undermining the propensity to save by punishing borrowers”.

He hoped that banking sector reforms being implemented by the central bank would help to correct the situation and inject more liquidity into the capital-starved market.

The acceptance of the Chinese yuan into the world’s basket of reserve currencies should offer new possibilities for the country, Mugabe said.

His comments follow Finance Minister Patrick Chinamasa’s remarks this week that Zimbabwe was looking at expanding use of the Chinese currency in the economy after the central bank in 2014 added the yuan to a basket of foreign currencies being used in the country that include the U.S. dollar, British sterling and South African Rand.

Zimbabwe adopted the use of multiple currencies in 2009 after its currency had been rendered worthless by hyperinflation.

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Video: Zimbabwe and China sealing bilateral ties through language

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