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Zimbabwe a country with no coins, US$1 is more useful than US$100

by Staff reporter
23 Feb 2022 at 00:49hrs | Views
ADRIANA Siwela, a 25-year-old college student in Harare, thought she could dash into a shop for a quick purchase of a US$2 packet of biscuits. But the cashiers sent her away. Her US$20 bill is considered "big money" in Zimbabwe these days — and big trouble for shops, which often cannot provide change for it.

She had to sprint out of the shop into the car park, where a bevy of unlicensed currency traders offered to swap her United States money for a bundle of Zimbabwean bills commonly known as real time gross settlement (RTGS) dollars and they would only exchange the money at the official rate of 115 to the dollar, far below the informal market rate.

"It's a frustrating situation," Siwela said. "A transaction of a minute swells to 10 minutes."

Fourteen years after Zimbabwe first adopted the US dollar as legal currency, it is still widely used here, in response to a soaring inflation rate that constantly erodes the value of the Zimdollar.

Yet it can be a nightmare for customers to use dollars in local shops, since few have change. Small bills are hard to find, and often reused to the point where they are tattered and worn, while coins are almost non-existent.

A common street joke in Zimbabwe is that a shopper waving a US dollar bill can buy a delicious dinner — but one with a US$100 bill will end up with an empty stomach.

The Zimbabwean government's currency policies are a confusing muddle, reflecting the disarray of its economic policies.

Supermarket prices are usually marked in the official currency, but US dollars are routinely accepted, sometimes at separate tills.

Fuel stations insist on US dollars, while restaurants provide booklets of prices in US dollars — even as some merchants are threatened with arrest if they quote US dollar rates.

A typical cashier's day means handling a queue of customers presenting a slew of different payment methods: the Zimdollar, US dollars, electronic money swiped on debit cards, and EcoCash, an e-money payment system that uses a cellphone PIN.

The result is shopping in Zimbabwe's retail outlets can stretch one's patience.

In the queues at the cashiers, shoppers can be waving up to four payment methods.

A customer, who wants to buy an ordinary soft drink, can be accosted by strangers, pleading to let them pay for the drink with their bank debit cards in exchange for Zimdollars or US dollars, which they can then use for bus fare or to buy pints of beer.

Many Zimbabweans are reluctant to use the local currency, since some shops — in violation of laws — give discounts to buyers using the US dollar.

The Zimbabwe central bank recently arrested business owners who quoted illegal black-market dollar rates to customers.

When customers use smaller US bills, change is either handed out in Zimdollars or small unwanted items such as matchstick boxes.

Coins, either US or Zimbabwean, are hard to find, largely as a lingering effect of the era of hyperinflation in the early 2000s, when Zimbabwe's economy was heavily damaged by corruption, land grab, suspension from the International Monetary Fund/World Bank budgetary support, and United States-European Union financial sanctions. Zimbabwe's annual inflation is close to 60%.

"Zimbabwe does not have a formal agreement with the United States government or its monetary authorities for the supply and use of the US dollar as her currency for transactional purposes," Clever Mumbengegwi, a senior economics professor at the University of Zimbabwe, told The Globe and Mail.

"Therefore, it does not get the supply of US$ directly from the Federal Reserve, but from secondary sources such as exports, foreign aid, diaspora remittances and currency imports."

In 2009, because of debilitating hyperinflation of up to 231 000%, Zimbabwe formally designated the US dollar as a currency but shoppers were given change in the form of South African rand coins.

"United States coins hardly circulate more than 100km beyond the US border because of weight and shipping costs", said Fanwell Mutogo, chief executive officer of the Bankers Association of Zimbabwe (BAZ), an industry lobby group for retail banks.

If US dollar coins are a rarity in Zimbabwe today, Zimdollar coins intended to be smaller denominations of the country's official currency — are a hard find, too.

When the local currency was reintroduced in 2019, domestic coins were widely available and shoppers got them as change at tills. But today, inflation has caught up with it.

"Zimbabwe bond coins are now of insignificant value due to the eroding of the purchasing power of the local currency inflation," says Mutogo, explaining why local banks no longer dispense domestic coins.

If there is a bright side to the dilemma, it is that the absence of coins in Zimbabwe is edging the country into the global lane of e-money, Mumbengegwi says.

The United Nations Capital Development Fund says 8,5 million residents out of Zimbabwe's roughly 17 million population have bank accounts.

"The Reserve Bank of Zimbabwe stopped minting coins in the hyperinflationary era of 2008-9. Coins are heavy, low value, costly to mint. The RBZ is promoting plastic and electronic money transfers as part of the global trend towards a cashless society," Mumbengegwi says.

Still, there are limits to what electronic money can do in the country. In 2017, a study by the University of Zimbabwe revealed that 66% of buyers and traders preferred cash transactions.

Some traders, especially those in rural areas where the majority of the population lives, take cash payments only and may not have chip-enabled devices to handle debit-card transactions.

Source - The Globe and Mail
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