Harare - The Reserve Bank of Zimbabwe all but dollarised the economy Wednesday in licensing the sale of basic commodities in foreign currency in some stores as more and more traders refuse to work with the virtually worthless Zimbabwe dollar.

At a press conference Wednesday bank governor Gideon Gono defended the "innovation" as necessary to ensure the availability of goods in shops and secure much-needed foreign exchange.

Under the scheme known as Foreign Exchange Licenced Warehouses and Shops (FOLIWARS), 70 retail shops and 155 wholesale outlets countrywide will be licensed to take payment in foreign currency.

US dollars, which trade at one to 15 trillion Zimbabwe dollars, are particularly sought after but South African rands are also commonly used.

Gono said basic commodities such as maize meal, milk, bread cooking oil, sugar and medicines would continue to be payable in local currency, except where the trader could prove they had to be imported.

The banker said he would also issue special licences to service stations to allow them also deal in foreign currency.

The launch of the initiative was interpreted as a sign that Zimbabwe officials have all but lost confidence in the local currency.

Last month President Robert Mugabe rewarded Zimbabwe Olympic medallist Kirsty Coventry for her performance in Beijing with 100,000 US dollars. (dpa)