The starting exchange rate between the USD and recently introduced RTGS dollar will be 1:2.5.
This was announced by the governor of the Reserve Bank of Zimbabwe, John Mangudya at a monetary policy review meeting this morning. The governor said this was agreed to by the central bank and the banks.
The rate itself is quite ambitious given that the parallel/black market rate today is at about 1:4. It means the official rate will give you less RTGS for every dollar you convert. This is not lost on Mangudya though. He said:
The street rate is way too high because there is a risk premium. You can go to jail for 10 years!
This is true of course. For formal businesses it is almost obvious they will not buy currency on the streets again because of the associated risks. Some were being forced to do so in the past days because the streets were the only place one would get reality that US dollars and our account balances are not the same.
About that, Mangudya has finally accepted responsibility and his implicitness in stealing from the population:
I am guilty as charged. Taking exporters’ money at 1:1 when prices had risen by 3 or 4 times was unfair.
The minister of finance Mthuli Ncube who was at the same event said:
The 1:1 peg was punishing exporters. We were killing the geese that lay the golden eggs.
It’s kind of infuriating that John Mangudya and Mthuli Ncube get to admit this because it’s convenient for them right now. How can we trust the central bank and government when they deny the truth just because it’s against their policy only to admit it after the policy changes?
If this floating of the exchange rate is going to work, trust is going to be very important.