COINS RETURNING TO ZIMBABWE

Zimbabweans are reuniting with something they abandoned long ago: coins issued by the state.

President Robert Mugabe’s government decommissioned Zimbabwe’s own dollars six years ago, as the country faced a broken local economy and runaway inflation. Since then, consumers have had to use U.S. dollars for larger purchases and rand coins from neighboring South Africa for smaller ones.

Now, a combination of forces is stretching this workaround to a breaking point. Expectations that U.S. interest rates will soon rise, for the first time in years, and economic turmoil in South Africa have widened the gap between the value of the dollar and the rand, which has shed more than 12% of its value against the dollar this year.

In response, Zimbabwe’s government has started minting a small amount of gold- and silver-colored coins. The Reserve Bank of Zimbabwe released $10 million of newly minted coins in December, in denominations equivalent to U.S. pennies, nickels, dimes and quarters.

Many people who lost their life savings in the 2009 currency collapse were initially afraid to use them, but the coins have begun to catch on.

“I still don’t trust those people at the reserve bank or anyone in this government,” said Enniah Muzvande, a hairdresser in Harare, Zimbabwe’s capital, who like many Zimbabweans lost most of her savings when the Zimbabwean dollar collapsed. “But at least the coins are working.”

Merchants are shunning the one- and two-rand coins that used to stand in for dimes and quarters, because their value is slipping so rapidly. Zimbabweans have grown to favor the dollar-backed “bond coins,” which were minted in South Africa and backed by a $50 million bond, over the increasingly cheap South African change.

Some observers think the reintroduction of locally minted coins is a step toward a full-blown effort to launch a new domestic currency, a move they say would be ill-advised.

“I have a sneaking suspicion it was a way to do a toe-test of people’s feeling about introducing a new currency,” said Tapiwa Shamu, a Zimbabwe-born investment banker at Nedbank Group Ltd.in Johannesburg.

But Reserve Bank of Zimbabwe Gov. John Mangudya reiterated that the Zimbabwean dollar won’t return soon. “That is not going to happen,” he said. “Our economy is just not ready.”

To read the complete article, see:
Change Comes to Zimbabwe, Replacing U.S. Dollars (www.wsj.com/articles/change-comes-to-zimbabwe-replacing-u-s-nickels-and-dimes-1439985310)

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