Shoppers in Harare discuss the implications of paying in other currencies
Zimbabweans will be allowed to conduct business in other currencies, alongside the Zimbabwe dollar, in an effort to stem the country's runaway inflation.
The announcement was made by acting Finance Minister Patrick Chinamasa.
BBC southern Africa correspondent Peter Biles says the Zimbabwean dollar has become a laughing stock. A Z$100 trillion note was recently introduced.
Until now only licensed businesses could accept foreign currencies, although it was common practice.
The country is also facing a deepening humanitarian crisis as well.
A cholera outbreak has killed over 3,000 people according to the World Health Organization (WHO).
And the World Food Programme (WFP) has revised up the number of people it says need food aid.
Our people are now using multiple currencies alongside the Zimbabwean dollar
Patrick Chinamasa Acting Finance Minister
It now says seven million Zimbabweans are in need of food aid, up from 5.1 million in June.
WFP regional spokesman Richard Lee said the situation had deteriorated rapidly.
"The economic situation has worsened more dramatically than we had anticipated," he told AFP.
"The agency is being forced to halve the cereal rations given to hungry Zimbabweans so that all the people in need can receive aid."
Mr Chinamasa made the announcement as he delivered the annual budget to parliament.
"In line with the prevailing practices by the general public, [the] government is therefore allowing the use of multiple foreign currencies for business transactions alongside the Zimbabwean dollar," he said.
The country is in the grip of world-record hyperinflation which has left the Zimbabwean dollar virtually worthless - 231,000,000% in July 2008, the most recent figure released.
Teachers, doctors and civil servants have gone on strike complaining that their salaries - which equal trillions of Zimbabwean dollars - are not even enough to catch the bus to work each day.
A 40-year-old Zimbabwean primary school teacher from the capital Harare, told the BBC news website earlier this week it cost nearly US$2 a day to travel to work, but inflation had reduced the average teacher's wage to the equivalent of US$1 a month.
He said he now made a living reselling maize to families in high density areas, as it made more money than teaching.
Before the announcement, shops in Zimbabwe were increasingly demanding payment in US dollars - a reality acknowledged by Mr Chinamasa.
"In the hyper-inflationary environment characterising the economy, our people are now using multiple currencies alongside the Zimbabwean dollar. These include the [South African] rand, US dollar, Botswana pula, euro and British pound among others."
A Harare resident said even street vendors were refusing to accept Zimbabwean notes.
Last year, the Central Bank was forced to slash 10 zeros from the local unit in an effort to make the currency more manageable.
Correspondents say that although the local currency will still be printed, all prices will be set in US dollars, making the Zimbabwe dollar irrelevant.
The country's economy is now on the brink of collapse - a situation worsened by the political crisis that resulted from last year's disputed presidential elections.
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