Zimbabwe’s ban on foreign currencies sparks outrage

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On June 24, the people of Zimbabwe woke up to the news that their government had banned the use of multiple currencies. In a statement, the country’s finance minister announced that “the use of the British pound, United States dollar, South African rand, Botswana pula and any other foreign currency whatsoever shall no longer be legal tender alongside the Zimbabwe dollar in any transactions in Zimbabwe.”

Zimbabwe has been in an economic crisis in the past decade, with the country’s inflation hitting unbelievable levels. By 2008, the inflation rate had shot through the roof, hitting 230 million percent in July 2008. The government, then led by the now-ousted Robert Mugabe, seemed short of ideas on how to fix the mess. According to reports, Mugabe instructed the central bank to print more money to fight the inflation. As anyone with the tiniest knowledge of economics knows, this only aggravates the problem.

And it did.

By November 2008, the country’s statisticians gave up on reporting the country’s monthly inflation rate after it hit 89.7 sextillion (10^21) percent, a record. The prices of basic commodities would multiply several times in any given day. It was total chaos. This was when the government decided to introduce the use of multiple currencies including the British pound, the U.S. dollar, the Botswana pula and more.

At the time the Zimbabwean dollar was scrapped, its value had dropped so much that for one U.S. dollar, the exchange rate was Z$35 quadrillion.

And now, the government has decided to bring back the local currency. As expected, the people aren’t happy with this decision. The country’s trade union has demanded that the workers continue being paid in U.S. dollars, failure to which it will organize mass protests.

And in all the upheavals and chaos, it becomes crystal clear that the country’s woes could all be solved by cryptocurrencies. Cryptos aren’t under the control of a central bank, a ruling party, legacy financial systems or any other central entity. The people don’t have to trust that the decision makers have their best interest at heart. Instead, they rely on mathematics and programming, certain that no one can manipulate the system.

And yet, despite the desperate need for crypto in the country, the government has been rather hostile towards the industry. The country’s central bank banned all commercial banks from processing payments for crypto firms in May 2018. Shortly after, it banned crypto trading in the country, a ban that was overruled by the High Court a few weeks after.

However, the people have been receptive to crypto as the need for alternative payment systems intensifies. Golix, the largest crypto exchange in the country has grown steadily, raising over $20 million last year.

There’s hope that the government will get onboard too. Zimbabwe’s neighbor, Zambia has urged the country to look into cryptos to solve its monetary challenges. Speaking recently, Zambia’s National Economic Advisory Council head Oswald Mungule stated, “Zimbabwe should just look for an underlying asset to base the crypto currency. The country can create a cyber currency using stable coins for bigger companies to make international payments and can peg this on gold or diamond which have stable value.”