Currency fears aroused by Zimbabwe’s new notes

Zimbabwe note launch stokes currency fears

http://www.bbc.com/news/business-38128236

Since Zimbabwe abandoned its own currency from 2009 after hyperinflation made Zimbabwean dollars worthless, the country has largely relied on U.S. dollars as its main currency. However, with slump in exports, fewer U.S. dollars could be earned back to the country, and the country gradually ran out of cash.

To ease the cash shortage and boost exports and economic growths, the Zimbabwean government has recently launched its own money, the so-called “bond note,” which has the same value as U.S. dollars. The government believes that using bond notes instead of U.S. dollars can reduce the flow of U.S. dollars going overseas, because the bond notes are only valid in Zimbabwe. Also, the launch of the new notes will relieve the liquidity crisis in the country and increase its exports.

However, not as optimistic as the Zimbabwean government, ordinary people there have already lose confidence in their own country’s currency. They worried that the newly issued bond notes could not hold their parity with the U.S. dollar for a long time, so that they queued for hours at the banks to withdraw their U.S. dollars. Also, many stores refuse to accept the new bond notes in case of its devaluation.

This article is accessible and provides a basic introduction of Zimbabwean’s current currency crisis and economic issues. However, it lacks an essential part for a good business story——the global impact. Whether the bond notes can make the country’s imports and exports balanced remains unsure, but worries that the notes will bring hyperinflation again have surged. And these will definitely influence the economy in Africa, and even the global economy. Moreover, the country now owns a lot of arrears and debts, which may bring worse economic and financial issues to the whole world if the country suffers economic fluctuation or even collapse.

 

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