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September 20, 2017

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Unease as Zimbabwe rolls out 'surrogate' dollars

HARARE, Zimbabwe -- Zimbabwe on Monday started issuing "bond notes," its own currency equivalent to the U.S. dollar, in a bid to ease critical cash shortages, but the move sparked fears of a return to hyperinflation.

The crisis-hit southern African country has used multiple foreign currencies, including the greenback, since 2009 after a rate of inflation that peaked at 500 billion percent rendered the Zimbabwe dollar unusable.

The introduction of US$2 and US$5 bond notes into circulation follows the issuing of bond coins over a year ago to ease shortages of change in smaller denominations.

The country has experienced a severe shortage of U.S. dollar banknotes in recent months which prompted President Robert Mugabe's government to print what locals have dubbed "surrogate money".

"The government is only treating the symptoms without attending to the problems and it's not going to solve anything," Antony Hawkins, an economist at the University of Zimbabwe Business School, told AFP.

"The problem is we are not earning enough foreign currency and bond notes are not going to solve that. It will make the situation worse.

"There is a saying in economic that says 'bad money drives away good money,' and that is what's going to happen."

The central bank has launched a media advertising blitz trying to allay people's fears, saying retailers and businesses have agreed to accept the bond notes.

But the illiquid Zimbabweans say they have no choice but to accept the pseudo currency.

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