Zimbabwe’s government, which banned use of the dollar nine months ago, has restored the peg its currency had to the greenback due to a scarcity of foreign exchange.
Zimbabwe faces shortages of fuel, power and food because it can’t afford to pay for the imports. The worst drought in 40 years means the government needs to import 1 million tons of corn to keep its people from starving.
“This intervention takes into account the country’s limited access to foreign finance, which is adversely affecting the country’s balance of payments,” John Mangudya, the central bank’s governor, said in a statement after a meeting of the monetary policy committee. The bank also reduced its key rate to 25% from 35%.
The decision represents a climbdown for the government of President Emmerson Mnangagwa, who had insisted that banning the dollar, legally in use since 2009, was necessary to restore financial stability. Instead, the economy is in its worst state since 2008 and is experiencing hyper-inflation.
The situation has been exacerbated by the coronavirus pandemic, which is roiling markets globally.
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