Zimbabwe’s central bank has announced that it would accept the Chinese Yuan and three other Asian currencies as legal tender following improved economic relations in recent years.
“Trade and investment ties between Zimbabwe, China, India, Japan and Australia have grown appreciably,” the acting governor of the Reserve Bank of Zimbabwe, Charity Dhliwayo, said on Wednesday.
Dhliwayo announced that exporters and the public can now open accounts in Yuan, Australian Dollars, Indian Rupees and Japanese Yen.
Zimbabwe abandoned its local currency, the Zimbabwean Dollar in 2009, when it became worthless amid chronic hyper-inflation and a deep economic crisis.
It accepts the US dollar and the South African rand as the main legal tender and the use of these currencies has helped to stabilize the economy after world-record inflation threw it into a sharp decline.
The Euro, Botswana Pula and British Pound are also legal tender in the country.
President Robert Mugabe has sought to boost economic relations with Asia after his relations with the West came under strain over his policy of seizing white-owned farms.
Chinese investors have over the past two decades entered diamond mining, construction and retail sectors in Zimbabwe but with the economy under pressure again, the bank appears eager to entice all the investors it can.
Dhliwayo said the economy was faced with a severe liquidity crunch, which meant that local industry could not obtain credit, as well as high import costs and uncompetitive local products.
She lamented unfavourable interest rates and bank charges which she blamed for low deposits as an estimated $2 billion is circulating outside the banking system. The low level of deposits has raised fears of a liquidity crisis in the sector.
The reserve bank chief said that for now, minimum capital requirements for banks would remain at $25 million, not $100 million as previously planned.
Banks were required to raise the $100 million by June this year but this has been extended to December 31, 2020.
She added that the central bank would resume its key functions of being the government’s bank and the lender of last resort by end of March this year after efforts to recapitalise the bank with a facility of between $150 and $200 million.