Harare: Zimbabwe is going to adopt the Chinese yuan as the main currency for use. Zimbabwe is the first country apart from China to use the yuan as its currency in the domestic market. It has been the legal tender along with the US dollar and South African Rand for the last couple of years.
Zimbabwe, where hyperinflation led to the ludicrous release of a single 100 trillion (Zimbabwean) dollar banknote in 2009, hopes to gain from the move. China in turn is offering to cancel a debt of $40 million, which Zimbabwe is unable to repay. Zimbabwe’s finance minister Patrick Chinamasa said the use of the yuan “will be a function of trade between China and Zimbabwe and acceptability with customers in Zimbabwe”.
“They (the Chinese) said they are cancelling our debts that are maturing this year and we are in the process of finalizing the debt instruments and calculating the debts,” Chinamasa said in a statement, quoted by Chinese news agencies.
Zimbabwe is now betting that the Chinese yuan would do a better job of bailing out its currency compared to the USD or Rand, and China is facilitating the process by offe ring to cancel accumulated debt. While yuan has been a legal tender in the country’s multi-currency system for two years now, it is not widely used in the domestic market in Zimbabwe.
China wants the local government to encourage wider use of yuan, and might even offer fresh loan to facilitate the process, sources said. Making the yuan a legal tender in another country will take forward China’s programme of internationalization of the yuan, analysts said. The yuan got a boost recently as the International Monetary Fund admitted it as one of the basket of preferred currencies in its special drawing rights.