Country Report Zimbabwe April 2011

Outlook for 2011-12: Exchange rates

The exchange-rate regime is likely to become an increasingly contentious political issue. Full dollarisation, with the US dollar as sole legal tender, is probably the simplest option, but as the differential between inflation rates in the US and Zimbabwe widens, businesses will question Zimbabwe's ability to operate effectively with the US dollar as its currency, particularly as much of the country's trade is with its Southern African neighbours. Meanwhile, both Mr Mugabe and Gideon Gono, the governor of the RBZ, have called for a return to the Zimbabwe dollar. Should ZANU-PF come out on top in elections, renewed use of the currency-which contributed to the country's disastrous inflation rates-cannot be ruled out.

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