Zimbabwe, a country still struggling with the after-effects of a recession that spanned almost a decade, and which forced the government to abandon its own currency, has adopted the Chinese yuan as legal tender in exchange for debt cancellation worth some $40 million.
China has become the largest investor in Zimbabwe and is Harare's second largest trading partner, after South Africa. Although the yuan was added to the basket of foreign currencies used in Zimbabwe over recent years, its use had not yet been approved for public transactions.
According to reports, Zimbabwe has received more than $1 billion in low-interest loans from China over the last five years. Patrick Chinamasa, Zimbabwe's finance minister, says that use of the yuan will be a function of trade between China and Zimbabwe.
Chinamasa said:
"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."
In early December, Chinese president Xi Jinping visited Zimbabwe and presided over the signing of various agreements, mainly to upgrade and rebuild Zimbabwe's infrastructure.
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