Samson: Crowding in front of banks in Zimbabwe as the new currency begins trading
22nd February, 2019
Zimbabwean citizens organized queues in front of banks in the capital Harare on Friday, coinciding with the start of the central bank operations of the new currency of the country
The Reserve Bank of Zimbabwe announced on Wednesday that it would break the link between its currency, which is called “Bond Note” and the US dollar, which was exchanged at the exchange rate of 1 dollar per pound note
The central bank also said that a new currency would be created from the “Bond Note” and the electronic funds would be known as “RTS $
The central bank sold the US dollar to banks at a rate of 2.5 trillion US dollars, according to central bank governor John Mangudia, according to a Reuters report quoting eyewitnesses in Zimbabwe
Zimbabwe has seen strong turbulence over the past few days as a sharp currency crisis has taken place after the devaluation of the local currency (the Zimbabwe dollar) in 2008, coinciding with strong inflation and fuel and food shortages
As the crisis worsened, the black market in Zimbabwe was worth about four times its value in the currency of the “currency note”, with a clear deficit in the availability of the US currency LINK
Samson: Zimbabwe launches new currency measure in bid to ease economic crisis
Zimbabwe has taken steps to address its worsening economic crisis by abandoning an official but artificial parity with the dollar
21st February, 2019
Zimbabwe, without its own currency for a decade, took steps to address its worsening economic crisis by allowing its surrogate currency, bond notes, and electronic funds to float freely against other major currencies, abandoning an official but artificial parity with the dollar.
Zimbabwe has not had a local currency since 2009 when it abandoned the Zimbabwe dollar due to hyperinflation that reached 500 billion percent, according to the IMF. To curb the ruinous inflation, Zimbabwe adopted a multi-currency system dominated by the US dollar. However, a shortage of cash dollars pushed the government in 2016 to issue a surrogate currency called bond notes, to trade alongside electronic money, which are funds electronically deposited into bank accounts.
Most Zimbabweans, including civil servants, are paid electronically into their bank accounts, but they cannot easily convert that money into cash needed to buy groceries and pay bills. Officially, the government maintained the bond notes and the electronic money were equal to the US dollar. But both have been devaluing quickly against the dollar on the illegal, but thriving, black market, forcing many businesses, including the government itself, to only accept the dollar for some transactions.
On the black market, in order to get $1 Zimbabweans have had to pay up to four times that amount in bond notes or through electronic transfers. The current crisis has resulted in increased inflation and shortages of fuel and food.
On Wednesday, the government announced measures to address the currency crisis. Reserve Bank of Zimbabwe governor John Mangudya abandoned the parity and announced that banks can now offer market-determined rates to buy cash dollars with the bond notes or through electronic transfers.
Bond notes and electronic funds will be known as a separate currency called Real Time Gross Transfer dollars, or RTGS dollars, said Mangudya in a much-anticipated monetary statement. Zimbabwe will continue using other foreign currencies such as the dollar and the South African rand, said Mangudya. “The RTGS dollars thus become part of the multi-currency system in Zimbabwe.
The RTGS dollars shall be used by all entities in Zimbabwe, including government and individuals in Zimbabwe for the purposes of pricing of goods and services, record debts, accounting and settlement of domestic transactions,” said Mangudya.
Before, most Zimbabweans who were paid their salaries through electronic transfers had to risk jail to change their money into dollars at the back market. LINK
Samson: Zimbabwe floats exchange rate, readies up new currency
Zimbabwe has floated its quasi-bond note currency, effectively devaluing the unit in what experts say is in preparation of a local currency through slow erosion of bloated bank balances that have driven Zimbabwe’s official inflation to above 50 percent.
Reserve Bank of Zimbabwe governor, John Mangudya, on Wednesday said in a 2019 Monetary Policy Statement that the government has had to do away with the 1:1 valuation for bond notes against the US dollar. After amalgamating the bond notes and electronic bank balances that also include mobile money, Zimbabwe has now denominated its quasi local units as RTGS dollars.
Economics expert, Tapiwa Mashakada, who is also secretary for economics in Zimbabwe’s main opposition, MDC Alliance, said the monetary policy had “de-dollarised cleverly” with the greenback, which has been in use as legal tender in Zimbabwe since 2009, becoming a “foreign currency” unit.
“Zimbabwe now has a sovereign currency called RTGS dollars which is a euphemism for Zim Dollars. The domestic currency has bounced back,” said Mashakada in response after Mangudya’s monetary policy.
The Zimbabwean central bank chief said “after taking account of the implications and putting in place safeguards to maintain stability in the fares market, the Bank is, with immediate effect, establishing an inter-bank foreign exchange market in Zimbabwe to formalise the trading of RTGS balances and bond notes with US dollars” and other currencies.
This will be undertaken on a willing-buyer, willing-seller basis through banks and bureaus de changes.
The central bank will now authorise bureau de changes to purchase foreign currency without limits but shall be limited to sell foreign currency for small transactions up to a maximum aggregate daily limit of US$10 000 (R139 000) per bureau de change.
“This is essential in order to bring sanity in the foreign currency market whilst at the same time promoting exports, diaspora remittances and investments for the good of our national economy,” added Mangudya.
Other experts said the implication of this is that the bond notes have been devalued and will now trade at the same parallel market rate which is between 1:3 and 1:4 against the US dollar.
The government, which is pushing austerity measures, is hoping to contain rampaging inflation by floating the bond unit. Finance Minister Mthuli Ncube has said that Zimbabwe, which frequently battles to settle crucial forex obligations, will introduce its own currency – which was abandoned in 2009 after record hyper-inflation – later this year. LINK