Zimbabwe, which has been without its own currency for a decade took steps to address its worsening economic crisis by allowing its surrogate currency, bond notes, and electronic funds to float freely against other major currencies, abandoning an official but artificial parity with the dollar.
Zimbabwe has not had a local currency since 2009 when it abandoned the Zimbabwe dollar due to hyperinflation that reached 500 billion percent, according to the IMF. To curb the ruinous inflation, Zimbabwe adopted a multi-currency system dominated by the U.S dollar.
However, a shortage of cash dollars pushed the government in 2016 to issue a surrogate currency called bond notes, to trade alongside electronic money, which are funds electronically deposited into bank accounts.
Most Zimbabweans, including civil servants, are paid electronically into their bank accounts, but they cannot easily convert that money into cash needed to buy groceries and pay bills.
Officially, the government maintained the bond notes and the electronic money were equal to the U.S. dollar. But both have been devaluing quickly against the dollar on the illegal, but thriving, black market, forcing many businesses, including the government itself, to only accept the dollar for some transactions.
On the black market, in order to get $1 Zimbabweans one had to pay up to four times that amount in bond notes or through electronic transfers.
The current crisis has resulted increased inflation and shortages of fuel and food.
On Wednesday, the government announced measures to address the currency crisis. Reserve Bank of Zimbabwe governor John Mangudya abandoned the parity and announced that banks can now offer market-determined rates to buy cash dollars with the bond notes or through electronic transfers.
Before, most Zimbabweans who were paid their salaries through electronic transfers had to risk jail to change their money into dollars at the back market.