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Is Zimbabwe going to adopt Chinese yuan as its main currency?

Every day we have a lot of political news coming from all over the world. The news can be interesting, absorbing, tragic, important, shocking, and urgent. Zimbabwe is in the center of political news today. Read the article to learn more.

zimbabwe

Some time ago Zimbabwe announced, that it would adopt the Chinese yuan as the main currency. What is interesting, it is the first country, which will use Chinese yuan except China. Earlier, there were agreements with other countries in Zimbabwe, and they have been using the US dollar and South African Rand.

READ ALSO: Why Zimbabwe’s Government shut down the Internet?

Crisis in Zimbabwe

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".

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.

How do they want to resolve this problem, adopting Chinese yuan?

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.

zimbabwe

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.

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