Zimbabwe sidelined its own near-worthless currency yesterday, declaring the US dollar, the British pound and even the Botswana Pula as legal tender in the country’s rapidly collapsing economy.

“The Government is allowing the use of multiple foreign currencies for business alongside the Zimbabwean dollar,” Patrick Chinamasa, the acting Finance Minister, announced in a humiliating admission that the Mugabe’s regime’s battle to prop up the national currency was lost.

From now on, shops, insurance companies, schools, state-owned utilities could charge in foreign and local currency — though many of them will have to be licenced. A range of taxes will also be payable in hard and local currency. Mr Chinamasa’s estimates of expenditure were presented in Zimbabwe dollars, US dollars and Rand.

Private companies will able to pay employees in hard currency, but the regime is risking serious unrest by effectively leaving out Government workers, including the army and the police.

Last month, hundreds of soldiers went on the rampage over monthly pay of several billion that then could buy a couple of loaves of bread. The unpredictability of the army is seen as the most serious threat to President Mugabe’s continued stay in power.

Mr Chinamasa said that civil servants would continue to be paid in Zimbabwe dollars but would also receive a monthly allowance worth a basket of basic household goods in US dollar terms — in government-issued vouchers.

The Government began to pull back on its rigorous exchange control policy late last year when it issued licences to shops - at US$ 20,000 a time - to charge in foreign currency. Supermarket shelves that had been empty for over a year were suddenly filled with imported goods, but police were still arresting people dealing in hard currency outside the official system and searching bus passengers for foreign banknotes.

MPs in the house of assembly roared their approval as Mr Chinamasa announced the move that ends decades of Soviet bloc-type economic controls which have steadily eroded what was one of Africa’s most robust economies. He also loosened a wide range of restrictions that have contributed to the economy’s ruin. “It requires a paradigm shift in terms of acknowledging the reality that we cannot eat what we don’t have,” he said.

He cancelled price controls introduced in May last year that instantly caused shortages of goods which surfaced again on the black market at sharply steeper prices. The Prices and Incomes Commission, whose inspectors put thousands of struggling businessmen in jail for “overcharging” and often then looted their businesses, would be confined to “an advisory role,” Mr Chinamasa said.

The Finance Minister stunned MPs by accusing the country’s central bank w of fuelling inflation through “excessive money supply from unbudgeted expenditure”. Under its governor, Gideon Gono, the bank has adopted a proudly declared policy of printing money as fast as it could to bail out the Government’s reckless spending. The bank’s enthusiasm for printing money has been the most important factor driving Zimbabwe’s hyperinflation.

Zimbabwe’s shambolic economic management was characterised by the way Mr Gono marketed his autobiography when it went on sale in December. In the state-controlled bookstore selling it, the book went for US$ 25 — the only item in the shop charged for in foreign currency.

Times Recommends

• 'New York has lost its edge'
• Copenhagen will fail – and quite right too
• More than 17,000 new underwater species found