HARARE (Zimbabwe) • Zimbabwe will officially make the Chinese yuan legal tender next year as it seeks to increase trade with Beijing.

President Robert Mugabe said on Tuesday that the planned use of the yuan as legal tender would boost liquidity and help give impetus to his country's faltering economy.

"The acceptance of the yuan into the world currency basket should offer a new possibility for us as from next year," he said.

The southern African country stopped using its own currency in 2009 after hyper-inflation, which had peaked at around 500 billion per cent, rendered it unusable. It then started using a slew of foreign currencies, including the US dollar and the South African rand.

The yuan was later added to the basket of the foreign currencies, but its use had not been approved yet for public transactions in the market dominated by the greenback.

"I am happy the Ministry of Finance and the Reserve Bank governor are looking at other strategies of reforming the banking sector and injecting liquidity into the market," Mr Mugabe said at the burial of Mr Aguy Georgias, a prominent businessman-turned-politician and deputy minister.

Zimbabwe Finance Minister Patrick Chinamasa announced on Monday that the country was seeking to expand the use of the yuan in its multi-currency economy.

Economic analysts believe it is the first time any country has adopted the yuan as a currency.

"I don't know of any other country that is using the yuan as a currency, as a second currency. So it's an interesting experiment," commented Johannesburg-based Iraj Abedian, chief executive of Pan African Investments and Research Services.

"I am sure there's more political misogyny than economic rationale. Mugabe is basically sending a very strong anti-Western message, and to the extent that the Chinese have committed a massive capital injection to Zimbabwe, Mugabe thinks that's a good enough reason to send that political message."

Zimbabwe announced on Monday that China planned to can-cel US$40 million (S$56 million) in debts that are maturing this year.

China is Zimbabwe's biggest trading partner following the African country's isolation by its former Western trading partners over its human rights record.

AGENCE FRANCE-PRESSE