When John Mangudya, the governor of the Reserve Bank of Zimbabwe introduced the re-instituted interbank foreign currency market, he said trading would start on the 25th of February which is tomorrow, Monday. One of the reasons could have been to make sure the legal framework is in place.
The law is now there, sort of
Yesterday the government gazetted a statutory instrument (SI) that establishes the so called RTGS dollars as a separate legal tender that can trade with other currencies freely. The government says we are still using a multi-currency system, the RTGS dollars are just one of the currencies in the basket.
It’s doubtful though that the authorities will allow the continued setting of prices in any currency other than the RTGS dollar. The monetary policy statement itself says:
The RTGS dollars shall be used by all entities (including government) and individuals in Zimbabwe for the purposes of pricing of goods and services, record debts, accounting and settlement of domestic transactions.
Not sure if the SI is legal
We will have to hear from legal experts on this but in our reading of the law the statutory instrument gazetted by the government yesterday may not be legal.
The parity between the USD and Bond Notes was established by an Act of Parliament. This poses a problem because, a statutory instrument cannot supersede an act of parliament.
Our expectation was that the legal framework for the floating of the bond note was going to be based on a pronouncement by the president under the presidential powers. However, like I said, we will need legal experts to comment.
RBZ and banks didn’t even wait for the SI
Even if the SI were sufficient, the banks did not even wait for it. The Standard quotes a senior RBZ official as having said:
The RTGS dollars shall be used by all entities (including government) and individuals in Zimbabwe for the purposes of pricing of goods and services, record debts, accounting and settlement of domestic transactions.
From the figures available, more than $5 million was traded at the opening of the interbank platform and with some big firms buying the USD$ and some selling it to banks.
So some banks traded on Friday and $5 million already changed hands. According to the above, the banks that didn’t trade did not do so because of legal reasons but because their systems were not ready.
We have a funny attitude towards the rule of law in this country.
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6 comments
You think the the legality of this move is going to deter them from going ahead? Trust me, the rule of law doesn’t apply in this section of the world anymore. We are surviving on their mercy.
This is the money the whole country is bleeding for! who cares about the lrgalities? that can be sorted last in yhis respect! $$$$$$$
Exactly my point. We treat laws as inconvenient things we choose to suspend whenever it suits. We must not cry foul when politicians do the same.
Banks could have waited. If laws are left to interpretation according to how hungry we are at any given time then they cease to be laws, they are suggestions. As long as we have suggestions instead of laws we should not expect much investment whether foreign or local – the risk profile is too high
EXACTLY! “We have a funny attitude towards the rule of law in this country” VERY good comment that! Applies to everything from trading, to traffic, to dumpling etc
The main problem in this country, we all have been brainwashed into corruption by our Govt. That is what happens from a one party system that has ruled since 1980. Corruption and no rule of order. So none of us know any better when it is convenient for us to get what we want instead of following a democratic law.
still faiing to comprehend the reason behind this monetary policy when in actual fact the former minister and governer reiterated that the bond is backed by a 200m afrexim bank blah blah blah