June 7, 2019 / 3:08 PM / 6 months ago

Zimbabwe president says new currency a must by year-end

HARARE (Reuters) - Zimbabwe must have a new currency by the end of the year, President Emmerson Mnangagwa said on Friday, arguing this would help stabilise prices after inflation hit a 10-year high.

FILE PHOTO: Zimbabwe's President Emmerson Mnangagwa delivers a speech as he visits an office of Russian diamond producer Alrosa in Moscow, Russia January 14, 2019. REUTERS/Maxim Shemetov/File Photo

The southern African nation in February removed an unrealistic peg for its electronic dollars and surrogate bond notes and merged them into a transitional currency called the Real Time Gross Settlement (RTGS) dollar.

The unit, which started trading at 2.5 to the dollar on the official interbank market when it was introduced on Feb. 22, was pegged at 5.9 on Friday, bringing its devaluation to 57.6 % to date. The currency has devalued by 49.4 % on the black market during the same time.

Most businesses are now pegging their prices in U.S. dollars and use black market rates to calculate RTGS dollar prices.

“As a country we must have our currency by the end of this year, we have started that journey,” Mnangagwa said at a gathering south of the capital Harare.

Prices of basic goods from sugar to maize meal have spiked in the last month as the RTGS dollar has lost value.

Mnangagwa said price hikes were unjustified.

Finance Minister Mthuli Ncube said in January that Zimbabwe, in the grip of a severe dollar crunch that has caused shortages of fuel and medicines, would have a new currency in the next 12 months.

Zimbabwe abandoned its own currency in 2009 after it was wrecked by hyperinflation and adopted the greenback and other currencies, such as sterling and the South African rand.

As physical dollar supplies started dwindling, the central bank introduced the bond note in 2016 at par to the dollar while the amount of electronic dollars increased, plunging the financial system into disarray.

Reporting by MacDonald Dzirutwe, Editing by William Maclean and Gareth Jones

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