ZIMBABWE DEVALUES CURRENCY AS ECONOMIC CRISIS DEEPENS

People queue outside a bank in Harare, Zimbabwe February 22, 2019.

HARARE (Reuters) - Zimbabwe underwent a de facto devaluation on Friday as its central bank began trading a sharply discounted replacement currency, attempting to ease a cash crunch that has hobbled the economy and plunged millions deep into poverty.

The country adopted the dollar in 2009 but, as a chronic hard currency shortage worsened, introduced a parallel system of bond notes pegged at 1:1 to the U.S. currency.

Effectively reintroducing a national currency, the Reserve Bank of Zimbabwe (RBZ) said on Wednesday it would carry out a “managed float” of the surrogate, which already fetches far less than a dollar on the black market.

On Friday, it exchanged the bond notes’ replacement for dollars at a rate of 2.5.

Economists cautiously welcomed the central bank’s intervention, which it hopes will temper demand for black market dollars and ease inflation as the new currency settles.

But uppermost in ordinary Zimbabweans’ minds were fears it might trigger a return to the hyperinflation that plagued part of the tenure of former leader Robert Mugabe.

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