updated 2/18/2009 11:13:28 AM ET 2009-02-18T16:13:28

Zimbabwe has begun paying government workers in U.S. dollars and will allow more trade in foreign currency, the new finance minister announced Wednesday in the first act by a unity government that gave the opposition control of much of the devastated economy.

Tendai Biti, a longtime opposition leader from Prime Minister Morgan Tsvangirai's party, said some 130,000 soldiers, teachers, civil servants and other government workers will receive $100 a month tax-free, replacing their local currency salaries.

President Robert Mugabe's party had opened up the economy to the U.S. dollar, the South African rand, the British pound and other stable currencies in an acknowledgment that runaway inflation had made the Zimbabwe dollar worthless. Ordinary Zimbabweans had long since stopped doing business in Zimbabwean dollars, with even bus drivers demanding fares in foreign currency.

Biti's announcement represented a broadening of that strategy in an attempt to cap spiraling prices for food and household goods that have contributed to widespread hunger and a medical crisis, among other problems. Biti also scrapped licenses the Mugabe regime had required for shops to do business in foreign currency, which will allow more merchants to trade in dollars and rands.

"Now that the country has embraced the use of multiple currencies which are relatively stable, the government expects all businesses to act responsibly on pricing ... in order to create the necessary confidence in the economy," Biti told reporters.

Expatriate dollars
Much of the foreign currency in use in Zimbabwe comes from some 4 million Zimbabweans — about a third of the population — who are living and working abroad after fleeing years of political and economic turmoil.

Last year, official inflation based on the tumbling local Zimbabwe dollar was given at 231 million percent but the state statistics office said it was no longer able to calculate the inflation rate because of acute shortages of gasoline, food and most goods that spurred black-market dealings.

The power-sharing deal between President Robert Mugabe and former opposition groups — created to end a year of political deadlock — aims to have rival politicians work together to address the chronic economic meltdown.

Critics blame Mugabe for Zimbabwe's economic collapse, in part because of land reforms that saw white-owned farms seized and given to his cronies instead of the impoverished blacks he claimed were going to benefit.

The hunger crisis in the former regional breadbasket has left up to seven million people dependent on foreign handouts and a cholera epidemic blamed on collapsed water, sanitation and health services has killed over 3,500 people since August.

More on: Morgan Tsvangirai | Robert Mugabe

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