On Wednesday, the Reserve Bank of Zimbabwe (RBZ) shocked Zimbabwe by redenominating bond notes, bond coins and RTGS balances (electronic money) to RTGS Dollars. This made the RTGS dollars formally exchangeable with US dollars and other foreign currencies.
Despite the government not admitting that the redenomination of the RTGS dollars effectively made them a new Zimbabwean currency, the truth of the matter is that they are a new currency. In the Monetary Policy Statement, the RBZ said the RTGS dollars have now “become part of the multi-currency system in Zimbabwe” meaning that RTGS dollars are now a currency themself. Therefore, officially RTGS dollars are not being labeled as a new currency but unofficially they are called a new currency.
This all has happened weeks after the Finance Minister, Mthuli Ncube promised that Zimbabwe will have its own currency in 11 months. With the introduction of the RTGS Dollars that overwhelmingly look like a new currency, one wonders whether if the RTGS dollars are the “new currency” the Finance Minister promised will come in 11 months time. In his words, Mthuli Ncube said:
On the issue of raising enough foreign currency to introduce the new currency, we are on our way already, give us months, not years. There is a balance between preservation of value and removing price distortions. The separation of accounts between the FCA and RTGS accounts was the beginning of currency reform……..Our job is to introduce a currency that will be stable and less volatile. Dealing with the fiscal side is the first order to move towards a stable currency, after all what we have now is fiscal policy and now monetary policy and we have to tighten the belt on the currency volatility.
As you can see the Mthuli Ncube’s prerequisite conditions of having a new currency were the separation of Foreign Currency Accounts and RTGS accounts and raising enough foreign currency. The separation of FCA and RTGS currencies was done but I dont think the government has raised the foreign currency to introduce a new currency. The foreign currency seems to have been for converting the $10 billion RTGS balances into US Dollars at 1:1 since at one point Mthuli Ncube announced that he had been offered a facility by the Afreximbank to ensure this convertibility.
Today in Bali, Indonesia at the IMF/World Bank Meetings, I had fruitful discussions with the President of Afreximbank Dr Oramah. Afreximbank has offered Zimbabwe a facility to guarantee 1:1 Convertibility of RTGS balances into US$ and availability of US$ for Nostro FCAs.
We all know that the deal never went through and I’m fairly sure that Zimbabwe doesn’t have $10 billion foreign currency to convert the RTGS balances (now RTGS dollars) into US dollars at 1:1. So, are the RTGS dollars the new currency when we don’t (didn’t) have the foreign currency to introduce a new currency?
Or did the Finance Minister go back on his word of first having foreign currency to introduce a new Zim currency, which therefore makes the RTGS dollars a new currency? Or he figured he was wrong after all to think that there is a need to first have foreign currency to introduce a new Zim currency? Still, the question remains: Are RTGS dollars Zimbabwe’s new currency Mthuli Ncube meant back in January?