Chinese Yuan to become legal tender following $40 million debt write-off

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December 24, 2015 5:12 PM

Zimbabwe had abandoned its own dollar back in 2009 after hyperinflation, which peaked at 500%, rendered it unusable.

President Robert Mugabe waits to address crowds gathered for Zimbabwe's Heroes Day commemorations in Harare, August 10, 2015. REUTERS/Philimon Bulawayo

According to various media reports, the Zimbabwean government has announced that it will make the Chinese Yuan legal tender in the country after the Chinese government agreed to cancel $40 million in debts.

"They [China] said they are cancelling our debts that are maturing this year and we are in the process of finalising the debt instruments and calculating the debts," minister Patrick Chinamasa said in a statement, according to the AFP.

The report also reveals that Chinamasa also announced that Zimbabwe will make the Chinese currency a legal tender as it looks to increase trade with China.

Zimbabwe had abandoned its own dollar back in 2009 after hyperinflation, which peaked at 500%, rendered it unusable.

READ: Finance minister says government to approach World Bank, IMF for new loans

The country then started to use certain foreign currencies, including the US dollar and the South African Rand. It then added that Chinese Yuan but its use had not been officially approved for public transactions in a market dominated by the US dollar.

The Yuan’s use "will be a function of trade between China and Zimbabwe and acceptability with customers in Zimbabwe," Chinamasa added, according to the Linda Ikeji Blog.

John Mangudya, chief of Zimbabwe’s central bank was in negotiations with the People’s Bank of China "to see whether we can enhance its usage here," said Chinamasa.

China is Zimbabwe’s principal trading partner after the the country became isolated by its western allies because of its human rights record.

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