9 June 2009

Zimbabwe: Banks Adopt U.S. Dollar As Base Currency

Harare — BANKS have successfully adopted the use of the United States dollar as the base currency for their systems.

The changeover which took effect from the beginning of the month relegating the Zimbabwean dollar, which has since independence been the base currency, to being the equivalence of foreign currency.

Zimbabwe dollar accounts were also converted to reflect the change in the currency base at a rate, which saw an equivalent of $6 quadrillion being converted at US$0,11.

Despite the adoption of multiple currencies at the beginning of February by the then Finance Minister, Senator Patrick Chinamasa in the 2009 National Budget, the local unit had continued to operate as the base currency.

However, this changed at the beginning of this month with the system change, which was initiated by the central bank.

What it now means is that all transactions in the country are based on US dollars and the local unit now functions like an external currency.

Sources in the banking sector said they had been fine-tuning their systems since the beginning of the month.

"We went to work with the information technology departments to make sure that the changeover was successful.

"What we did is like upgrading the US dollar which until then was currency one to becoming currency 0 (base currency) taking over from the Zimbabwe dollar which now is currency 43.

"Being currency 43 is not reflective of anything because it is just a number. What it now means is that when trading the local currency is the US$ and the local unit is now foreign currency," said the source.

He added that the change was merely an administrative exercise, which may not have a material effect on the current currency regime.

There have been calls by the business sector for the country to adopt a "softer currency" the rand as opposed to a "hard currency" such as the US dollar.

The sector has requested that the Government should approach the South African government so that it could enact regulatory approval for the free movement of the rand into the local economy.

The rand is recognised as the reference currency under the Short-Term Emergency Recovery Programme, which underpins the country's economic turnaround process.

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