Zim banks pursue Yuan, Rupee supply

Published: 12 March 2014

Zimbabwean banks are in negotiations with China and India for supply of the countries' currencies.

This comes on the back of the Reserve Bank of Zimbabwe (RBZ)'s addition of four new currencies - Chinese yuan, Indian rupee, Japanese yen and Australian dollar - to the country's multi-currency basket.

In 2009, the country abandoned its worthless Zimbabwe dollar, ravaged by hyperinflation which topped 231 million percent, to adopt a multiple currency system, dominated by the United States dollar and South African rand.

"We are currently in negotiations with the People's Bank of China and we will soon be engaging the central banks of India and Australia so that we can have their currencies circulating here," said Sam Malaba, Bankers Association of Zimbabwe (Baz)'s vice president.

Following introduction of the multi-currency system, Zimbabwe has been hit by an acute liquidity crisis.

However, Baz believes the embrace of more currencies will not only help ease the liquidity crunch but also help eliminate exchange hassles for business.

"The introduction of four new currencies will also assist in smothering trade with these countries," Malaba added.

Banks are already opening accounts denominated in the new currencies.

While market analysts feel the introduction of the yuan and the rupee could bolster already increasing trade between Zimbabwe and the respective countries, they question the feasibility of the introduction of the Australian dollar and the Japanese yen.

In the past five years, Zimbabwe-China relationship has strengthened with trade between the two reaching $1,1 billion as at December 2013.

"Since 2009, bilateral trade between China and Zimbabwe has been on a fast track and trade volumes have kept rising.

"I believe that in the next five years, with deepened cooperation between the two sides, the trade volume will continue to grow," said Chinese Ambassador to Zimbabwe Lin Lin.

The Asian giant has emerged as Zimbabwe's closest international ally after Western countries imposed sanctions a decade ago on President Robert Mugabe over alleged violations of democracy and human rights abuses.

Relations between the two countries deepened further after Zimbabwe adopted a "Look East Policy" in 2003, and since then, China has become a major source of imports as the southern African country's economy recovered from a decade of contraction.

Trade volumes have largely been driven by China's growing appetite for raw materials while Zimbabwe has mainly exported tobacco and precious minerals.

Although trade between the two countries has been increasing steadily over the years, it spiked around 2010 when the country started enjoying economic stability under the coalition government of Zanu PF and the Movement for Democratic Change formations.
- dailynews