ZIMBABWE – According to media reports, the government of Zimbabwe and of China are finalizing plans to increase the use of the Chinese Yuan in Zimbabwe for public transactions. Since 2009, Zimbabwe has abandoned its own currency, the Zimbabwean Dollar, due to hyperinflation and political crisis in Harare causing the value to their currency to plummet.
The Zimbabwean Finance Minister, Patrick Chinamasa, announced that two countries are in negotiations to increase the local usage of the Yuan as well as the possibility of canceling Zimbabwe’s $40 million debt to China.
Minister Chinamasa expressed his hope that allowing tourists to pay for services in Yuan would allow Zimbabwe to begin paying off their debt to the Chinese.
China is Zimbabwe’s largest investor and the two countries have enjoyed a close trade partnership. In 2014, Zimbabwe made the Chinese Yuan part of its official “basket of currencies”. The basket also includes the South African Rand, the US Dollar, and the British Pound.
The Chinese Yuan is also making progress in other parts of the African continent. In June of this year a third of the payments between South Africa and China were made in Yuan without switching between the Rand or the US Dollar first. Ghana also allows banks to sell Chinese Yuan freely, according to reports.
The hope is that by easing the use of the Chinese Yuan, African countries can begin to address the massive trade imbalance between the continent and China. However, the imbalance may not be assisted by this move given that African exports to China have fallen while imports from China to Africa are increasing.
Finally despite the strong trade relationship between China and Zimbabwe the US Dollar still remains the most used currency in the southern African nation.