Locals as well as visitors to Zimbabwe will soon be able to walk into shops and pay for purchases in renminbi.
The announcement that the Southern African nation of 15 million people will soon adopt the Chinese currency as its main legal tender came late in December from the country’s Finance minister, Patrick Chinamasa. In exchange for adopting the renminbi, Chinamasa explained in a statement, Beijing will cancel approximately $40 million worth of Zimbabwean debt owed to China that is due to mature this year.
The news represents the latest extraordinary twist in the country’s turbulent monetary history. With the Zimbabwean dollar left virtually worthless as a result of years of hyperinflation, in 2009 the Reserve Bank of Zimbabwe adopted a multiple-currency system, authorizing over time the use of up to nine foreign currencies, the goal being to improve the cash supply and restart bank lending. The renminbi was added to the basket in 2014, but its use had not been approved for public transactions in a market dominated by the US dollar and the South African rand.
So far, most analysts seem to consider the move a publicity stunt: The Chinese can claim that the renminbi is quickly becoming a truly international currency, while Zimbabwe is awarded with debt relief. However, there could be more to it. Although the renminbi may not become ubiquitous on the streets of Harare, the hope is that adopting a foreign currency will help alleviate the country’s hyperinflation cycle.