Zimbabwe's impoverished public servants received a surprise bonus yesterday when the new unity Government announced that they would be paid in US dollars rather than the worthless local currency.

In a deft move designed to outflank President Mugabe, Tendai Biti began his reign as Finance Minister by introducing US dollar vouchers for 130,000 soldiers, teachers, police and other civil servants.

Mr Biti said that state employees would receive a minimum of $100 (£70) this month, redeemable at designated banks. Soldiers received their pay cheques on Tuesday. Police, teachers and most of the Civil Service were paid yesterday and health workers can expect to collect their salaries today.

Civil servants such as teachers, nurses, doctors and even soldiers had earlier gone on strike demanding to be paid in hard currency.

“We have to get Zimbabwe working again. Getting teachers to school is part of efforts to get Zimbabwe to work again, having examination papers being marked is part of having Zimbabwe work again,” Mr Biti said.

The face of the armed policeman stationed outside the Russian Embassy yesterday said it all: he grinned widely when asked if he had been paid in hard currency. His monthly pay last month of 30 trillion Zimbabwe dollars could not buy so much as a single banana today.

Three weeks ago Mr Mugabe's Government announced that it was allowing foreign currency to be used alongside the vanishing Zimbabwe dollar. The country's political and economic crises have reduced the national currency, once on a par with the British pound, to almost nothing, forcing its citizens to pay trillions of local dollars for a loaf of bread.

The Central Bank recently knocked 12 zeros off the local currency — turning one trillion dollars into one dollar — in an effort to get the economy moving again, to no avail.

Analysts feared that Morgan Tsvangirai, the leader of the opposition Movement for Democratic Change (MDC) and now Prime Minister of the unity Government, might be setting himself up for a fall when he promised after his inauguration last week that all civil servants would be paid in hard currency. Mr Biti said yesterday, however: “There is liquidity, the banks are coping.”

There was cash in the banks to serve the vouchers for two months, he said, but after that he expected improved inflows of hard currency to be enough for the 130,000 salaries.

Mr Biti did not elaborate on how he would raise the cash in April, nor would he expand on his hint that “the Prime Minister has friends”. Mr Biti would have needed as much as $150 million in US currency to meet yesterday's salary payouts. Diplomats pointed out, however, that the Mugabe regime was never short of hard currency for its pet projects.

“The health service, the schools, sanitation could go to hell, but there was always ready cash for Grace's [Mr Mugabe's wife] shopping, Mercedes cars for the bigwigs, mass bribes for the voters,” said one diplomat. “That's changing now, I hope.”

Mr Biti went further in his efforts to jolt the country's economy out of 29 years of “Mugonomics,” the corrupt, dead-handed state controls that have doomed what ten years ago was one of Africa's few economic successes. He abolished the exorbitant licences for shops to sell in foreign currency, told banks to let credit cards draw on hard currency and boosted interest rates to encourage people to save.

He promised also that the inflation figure — which stood at 231 million per cent in June last year, when further calculations became impossible — would be calculated in American dollar terms in future. Mr Tsvangirai's promise to pay government workers in hard currency was a calculated risk intended to shore up his popular support and weaken the power base of Mr Mugabe, who runs most of the security forces.

On a different front, though, the Prime Minister suffered a setback yesterday when Roy Bennett, his Deputy Agriculture Minister-designate, who was arrested on Friday, was denied bail by a magistrate in the eastern city of Mutare.

Mr Bennett is charged with possession of weapons “with intent to commit sabotage, banditry and terrorism”. The magistrate said he was obliged by law to keep Mr Bennett in custody until his next court appearance in a fortnight, because of the severity of the alleged offence.

His arrest appears to be part of a strategy by the Mugabe regime to keep the popular and highly influential Mr Bennett out of the Government at all cost, forcing the MDC to withdraw from the coalition agreement and putting Mr Mugabe and his shadowy security bosses in control again.

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