Zimbabwe will launch a new currency in the next 12 months to address the crisis it is facing due to a shortage of U.S. dollars, according to Finance Minister Mthuli Ncube, state newspaper The Herald reported Jan. 12.
The country is suffering from a hard currency shortage after the collapse of the Zimbabwean dollar and problems with its bond note, an interim currency that was initially pegged to the U.S. dollar.
"A long-term solution to the crisis is: currency reforms, currency reforms, and currency reforms; and ending arbitrage opportunities in the market. Accepting the U.S. dollar as the only legal tender is not currency reform, it's submission," Ncube said.
Zimbabwe has less than $400 million in cash available, according to a Reuters report that cites central bank's figures — some way short of the $10 billion in electronic funds in local bank accounts.
Ncube said the challenge is to raise enough foreign currency to anchor Zimbabwe's new currency, and argued that there was no point in adopting the South African rand.
"I also hear that the citizens are pushing towards adopting the rand, I even argued for it years ago and there was a reason, you know, if we are going to assume the rand as our currency, we first of all have to acquire the rand and we need U.S. dollars first to purchase the rand. In the long-term, Zimbabwe needs its own currency," he said.
Ncube said Zimbabwe's "economy will shrink by as much as 50%" if it adopts the U.S. dollar as its sole legal tender and that it would not solve the country's macroeconomic challenges, according to the Zimbabwean newspaper.