Zimbabwe forced to legalise foreign currency as government attempts to repair shattered economy

Central bank Governor Gideon Gono said 1,000 retailers and 200 wholesalers will be allowed to sell in foreign money, while motorists will also be able to buy fuel in foreign currency.

The announcement is the clearest sign yet that authorities are losing the battle against a thriving black market.

The Zimbabwean government has finally bowed to pressure and legalised the use of foreign currency

'With immediate effect there will be foreign currency licensed warehouses and shops and we are doing this for an initial period of 18 months, as an experiment,'  Gono said.

The most used foreign currencies in Zimbabwe are the South African rand and the U.S. dollar.

Reserve Bank Govenor Gideon Gono, said foreign currency would be accepted for 18 months

Zimbabwe is suffering a political crisis and economic meltdown, with inflation running at more than 11 million per cent and unemployment at about 80 per cent.

Basic goods are scarce and the central bank has repeatedly re-denominated the Zimbabwe dollar to try keep up with inflation.

In its latest move it lopped off 10 zeros on August 1 to help bring relief to consumers forced to carry large bags of money to buy everyday goods.

But while the official rate to the U.S. dollar stands at 60, the black market rate has plunged to 2,000 to the greenback.

Gono said manufacturers could sell to the licensed shops in foreign currency, and that both Zimbabweans and foreigners would be allowed to run the stores.

Despite the move, he stressed the Zimbabwe dollar remained the official currency.

'Some of you may ask, "are we now trying to dollarise the economy?" No, the Zimbabwe dollar remains the legal tender" Gono said.

Analysts say the economy is unlikely to rebound until a post-election crisis is resolved.

President Robert Mugabe and opposition MDC leader Morgan Tsvangirai are in talks to forge a new all-inclusive government after a disputed election.