Zimbabwe’s curious plan to adopt China’s currency

The announcement comes after China confirmed its plans to cancel $40 million 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. Last year, Zimbabwe’s central bank added the yuan to a basket of currencies used in the country that includes the USA dollar, British sterling and the South African rand. Yuan was included amongst the foreign currencies later, but it did not receive approval for public transactions.

“The acceptance of the yuan into the world currency basket should offer (a) new possibility for us as from next year”, Mugabe said.

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

Zimbabwe is negotiating with China for the cancellation of part of its one billion dollar debt.

The hope is that by easing the use of the Chinese Yuan, African countries can begin to address the massive trade imbalance between the continent and China.

“There can not be a better time to do this”. Zimbabweans were told that they would be able to exchange bank account balances of up to $175,000,000,000,000,000 Zimbabwean dollars for just 5 US dollars – a heartbreaking sum, given that it was many people’s life savings.

The president says his finance minister and central bank governor are looking at ways of injecting liquidity into the market.

In early December, Chinese President Xi Jinping visited Zimbabwe and signed a great deal of agreements in economy and high technology with the President of Zimbabwe.

Zimbabwe, which has been isolated from the West over its human rights record, looks to boost trade with its largest investor through use of the yuan.

Zimbabwe is reported to have received more than $1-billion in low-interest loans from China over the past five years.