Dr John Mangudya has just announced that in Zimbabwe we now have something called RTGS dollars which will trade with the US dollar and other currencies at market determined exchange rates. Questions asked after the presentation reflect that there is still some bit of confusion over what money is what money in Zimbabwe.
In simple terms, Mangudya says most of the money in our bank accounts is no longer called US dollars. The money is not Zim dollars either, it’s now called RTGS dollars. Yes, it sounds unbelievable that a settlement system is now a currency but this is Zimbabwe.
I said most of the money in our bank accounts because since the beginning of October 2018, banks were instructed to separate bank accounts into what was then called the FCA RTGS account and the FCA Nostro account. Essentially if someone had real physical US dollars in their hand they could deposit it into the nostro account so they could be able to demand it as real physical US dollars. Apart from that your money was not considered to be US dollars although your bank statement called it such.
Money in the FCA RTGS account could only be withdrawn as bond notes or coins when available otherwise you could only use it to buy stuff electronically.
Mangudya now says all that money that was in the RTGS account is now called RTGS dollars. The bond notes are also RTGS dollars as well as the bond coins. So, when you are holding a purple $5 bond note the more accurate term for what’s in your hand is RTGS $5. Maybe we should just shorten it to R$5.
This R$ money is now distinct from the US dollar and will officially trade against it. The laws of supply and demand will dictate what rate the two will trade at any given time.
John Mangudya and his kingdom are just officially acknowledging the obvious. Who didn’t know that the money in our accounts was swapped a long time ago and hence is no longer US dollars?
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